Zambian President Edgar Lungu may consider imposing exchange controls to stem the kwacha’s “freefall” if other measures fail, his spokesman Amos Chanda said.
“The president cannot allow a national currency to collapse because of a false belief in a free-market economy fixing themselves even when things are clear that the market won’t fix itself,” Chanda said in an interview broadcast on state television in the capital, Lusaka, on Sunday. “The president could intervene, through the Treasury of course, to allow the central bank to regulate if the markets don’t behave properly. There are exchange controls as a measure.”
The kwacha has slumped 25 percent this quarter, the most among more than 150 currencies monitored by Bloomberg. It traded at 10.05 against the dollar at 8:08 a.m. Monday in Lusaka. A power crisis and copper prices trading near six-year lows have hit the currency of a country that relies on the metal for more than 70 percent of its exports.
Chanda’s remarks come after Finance Minister Alexander Chikwanda and Bank of Zambia Governor Denny Kalyalya both ruled out exchange controls last week, saying it would only exacerbate the situation.
“They don’t help, they actually accentuate the difficulties,” Chikwanda said in a Sept. 3 interview. “Even the little forex we have would be taken out if we have control of capital movement. You create panic. It’s not a conducive environment. It’s a recipe for getting the country backward.”
Zambia will release $120 million kwacha into the market in the coming days to provide dollar liquidity, Chanda said Sunday. A further $140 million to pay contractors will be offloaded within two weeks, he said.
“The kwacha will not get any worse than it is,” Chanda said.