LUSAKA (Reuters) – Zambia’s kwacha fell nearly 3.5 percent to an all-time low against the dollar on Monday, weighed down by continued concerns over growth in China, a major export destination for Africa’s number two copper producer.
“What is exaggerating these moves is the concerns over demand from China, as Zambia is highly dependent on copper,” said Gerald Ndhlovu, a trader with FNB’s treasury division in Lusaka.
“You expect these moves but the speed at which these are happening is worrying,” Ndhlovu said.
The kwacha first shed more 2 percent earlier in the session before slipping further. By 1300 GMT the unit traded at 8.8500, down 3.15 percent, having fallen as low 8.8900.
Zambia’s finance ministry said on Sunday it expected slower economic growth and a wider fiscal deficit in 2015 due to weak global demand for copper, more so in the economy of China – a key consumer of the metal.
Copper export earnings dropped 29.9 percent in the six months through June, compared with the first half of 2014, the ministry said.
“A big problem in Zambia is also the power crisis, and the revision of the government’s growth forecast this year to 5 percent,” said Irmgard Erasmus, a Zambia analyst at NKC African Economics.
The southern African country has been battling severe power shortages after drought depleted water levels at hydro-electric plants, forcing power companies to cut electricity supply to mining firms earlier this month..
“Dollar supply is very restricted due to reduced productivity arising from the power problems that Zambia is facing,” analyst Maambo Hamaundu told Reuters, adding that this was preventing fresh investment into the economy.