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STANBIC Bank Zambia has said the current depreciation of the Kwacha could trigger an increase in lending interest rates, which will in turn slow down the growth of the domestic economy.
And the Zambia Association of Manufacturers (ZAM) has said Small and Medium Enterprises (SME’s) importing goods are faced with major financial constraints due to the recent depreciation of the Kwacha.
Stanbic Bank Head of Global Market Victor Chileshe said pressure on the local currency will continue for as long as imports growth continues to outstrip exports growth.
Mr Chileshe explained that the strong demand for imports in relation to exports has largely contributed to the current Zambian Kwacha malaise.
He made the remarks during a cocktail party held with stakeholders at the Southern Sun Hotel in Lusaka recently.
“The depreciation of the Kwacha could trigger an increase in interest rates which will in turn slow down the growth of the domestic economy.
“However, Stanbic Bank expects that the rise in interest rates could attract portfolio investors in the medium-term and this would provide some support for the Kwacha,” he said.
The BoZ has offloaded $178 million from its reserves onto the domestic economy to save the Kwacha from further depreciation.
The Kwacha last week breached the K6-mark for the first time to make it one of the worst performing currencies in the world.
ZAM chief executive officer Maybin Nsupila said in an interview that the cost of importing goods has increased due to the depreciation of the Kwacha and SMEs are finding it expensive to operate.
Mr Nsupila said Zambia was still heavily dependent on importing raw materials for production in the manufacturing sector and the trend has proved costly for SMEs.
“The majority of SMEs are self-financed and now that the cost of importing raw materials has gone-up due to the changes in the foreign market, it will be expensive for them to sustain operations,” he said.
Mr Nsupila further attributed the poor performance of the Kwacha to poor economic policies that have put-off investor confidence in the country.
“There has been uncertainty in economic policies and this has forced certain people to hold on to their convertible currencies,” he said.
Mr Nsupila said Government should consider reviewing some clauses in policies such as the Statutory Instrument (SI) 55 of 2013, to balance the flow of foreign exchange.
