PRICES of essential commodities are likely to remain high despite the appreciation of the Kwacha against the US dollar, says financial analyst Maambo Hamaundu.
Mr Hamaundu said the Kwacha becoming bullish the appreciation was temporary which would only see a reduction in prices of imported goods such as cars.
He said the strength of the local currency would only be appreciated by local traders and consumers if it continues to appreciate against major convertible currencies for a period of four weeks. Mr Hamaundu explained that there was no guarantee that there would be a reduction in prices in most commodities because during the time the Kwacha lost value most traders incurred some huge losses.
He said demand for US dollars was still likely to increase owing to the need for companies to start importing goods ahead of the festive season.
Mr Hamaundu said in a floating system, the rules of supply `and demand govern a foreign currency’s price.
He urged the Government to issue prompt and “guarded statements” on the country’s economic outlook when responding to international credit rating agencies and avoid rubbishing them.
The kwacha’s volatility on the foreign exchange market had continued enduring its worst performance last week.
Within one year, the kwacha has lost strength by over K4.50, and depreciated by over 45 per cent, the highest depreciation ever seen.
Mr Hamaundu said Bank of Zambia (BoZ) intervention in the local financial markets would only temporarily halt the local currency’s depreciation because the central bank had a limited supply of foreign exchange.
He warned that demand for the US dollar was expected to grow in the runner-up to Christmas, which would put more pressure on the kwacha’s recovery.
Regardless of the form it takes, money had the same basic goals that encouraged economic activity by increasing the market for various goods and services.
It also enabled consumers store wealth and therefore addressed long-term needs.