THE kwacha’s rapid fall worsened yesterday when the local currency easily breached the K14 psychological mark to hit all-time lows of K14.63 per dollar on interbank by midday.
Meanwhile, Dr Cosmas Musumali says the shocking depreciation of the kwacha is a reaction by economic actors to both deteriorating fundamentals and the political climate in the country.
And Felix Mutati says the kwacha has gone berserk.
“There is a combination of falling copper prices, strengthening dollar but this particular scenario has to do with the bullish dollar,” a market source said anonymously after the significant fall in the local currency, which lost almost K1 in a single day after closing trading on Monday at K13.80. “The South African rand has come under pressure, the story is the same with the euro and the pound but the kwacha has been the worst hit. In the market right now, there is no one selling dollars but the number of dollar buyers keeps rising.”
On interbank yesterday, the kwacha was trading at K14.35 and K14.63 for bid and offer against the US dollar, while the British pound was trading between K21.66 and K22.10 and the euro was averaging K15.40 and K15.71 for bid and offer.
The South African rand was averaging K1.00 and K1.02 for bid and offer against the kwacha.
However, after massive BoZ intervention, the kwacha cooled off to average K14.00 against the dollar, K21.09 against the pound, K14.92 against euro and K0.97 against the South African rand.
But Dr Cosmas Musumali, who is also Rainbow Party first deputy general secretary, explained in an interview that the combination of economic and political instability would continue piling pressure on the kwacha over the next months.
“From the economic perspective, closure of businesses, job losses, rising inflation rate, declining reserves and negative balance of payments in the midst of an inept fiscal regime are the worst signals for any currency market,” he said.
“The further depreciation of the Kwacha is a reaction by economic actors to both deteriorating fundamentals and the deteriorating political climate in the country.”
Dr Musumali added that the recent “political drive” to close The Post using the Zambia Revenue Authority was further contributing to political and economic instability in the country.
“In the eyes of economic actors, the government is irrational and out of control! Political expediency and vendettas are driving the momentum towards the 2016 elections,” said Dr Musumali.
And Mutati, the former commerce minister, said Zambia, as a matter of urgency, needs to seek an aid programme with IMF to reinstate confidence in the economy.
He said the kwacha fall had gotten out of control and it was very clear current programmes of the government to aid the embattled local currency had failed.
“It’s gone berserk, the kwacha, this is out of control,” Mutati said. “In terms of the way the economy is moving, we have gone to a stage where it’s no longer shocking to see where the dollar is resting. There are inadequate policy instruments that can be deployed to intervene in this movement and this inadequacy is being created through excessive borrowing by government to fund the budget deficit.”
He said corroding confidence in the Zambian economy was increasing the demand for foreign currency as people sought safer havens.
“So, in a scenario such as this one, you have tremendous erosion of confidence and you create a component of panic buying of the foreign currency as the safety storage point,” said Mutati.