By ALICE NACHILEMBE
Center for Trade Policy and Development (CTPD) says that the appreciation of the Kwacha is due to the Bank of Zambia’s (BoZ) intervention in the foreign exchange market.
CTPD Senior Researcher Public Finance Gabriel Pollen said that the rising of copper prices and production expansion are considered to have led to improved foreign exchange flows from the mining sector through tax receipts remitted directly to the Bank of Zambia.
Mr Pollen also said that the oversubscription in bond issuance standing at 116 percent was powered by inflows from non-resident investors making purchases of government securities, subsequently leading to an improvement in foreign exchange availability.
He said the appreciation of the Kwacha largely reflects changes in the actual supply of foreign exchange and expectations of further improvements in supply associated with the forthcoming IMF Special Drawing Rights (SDR) allocation.
Mr Pollen said the structural dynamics of Zambia’s economy reflecting in the undue reliance upon copper exports leave the Zambian economy largely susceptible to the vagaries of the external sector.
He said the Kwacha appreciation has sent scores of economic commentators into a frenzy of excitement, speculating about the potential causes of the appreciation amid the third wave of the Covid-19 pandemic and two weeks before the presidential elections.
He said structural transformation of the Zambian economy is the answer the country seeks for its developmental pursuits more broadly and stability of its currency and rate of inflation in particular.
“Structural transformation calls upon building an integrated structure of production, bound together by coordinated investments across sectors and economic activities.
“Initially, this will imply creating productive capacity in linkage and employment maximizing agricultural and industrial sectors, with a view to reducing import dependence,” he said.
