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The Bank of Zambia yesterday assured that it was putting in place necessary interventions to stabilise the Kwacha that has slumped against the dollar in view of the United States’ decision to reduce the amount of its currency on the international market.
On Wednesday, the Kwacha hit a record low of K6 against the US dollar in over two decades.
The central bank, however, advised foreign market participants not to panic, adding that Zambia as well as other emerging markets have been affected by the US’s decision.
BoZ head of public relations Kanguya Mayondi said in a statement issued on Thursday that the reduction in the US dollar liquidity supplied through quantitative easing programme is affecting several emerging markets and Zambia is not an exception.
“Specifically, the Federal Reserve’s course of action has led to fears of slow growth of major emerging economies particularly, China,” Mr Mayondi said.
He said the price of copper, Zambia’s major export earner, remains subdued and is undermining investor optimism.
Mr Mayondi said the depreciation trend in the exchange rate observed overtime is also due to a combination of domestic and international market developments.
Mr Mayondi said the consistent economic growth Zambia has recorded over the years has led to a steady increase in imports, particularly capital goods for sustaining of the growth.
He said although exports have also continued to show impressive growth, demand for imports has relatively been stronger and is contributing overtime to the exchange rate depreciation.
Mr Mayondi said the bank has, however, observed that panic has gripped market participants and is undermining the smooth operation of the foreign exchange market.
Mr Mayondi said the central bank has tightened monetary policy to stay on course with the attainment of the inflation target of 6.5 percent.
He said liquidity-draining open market operations have been stepped up while the recent increase in the statutory reserve ratio is expected to take effect on Monday next week.
