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THE Injection of US$ 50 million Dollars into Zambia’s economy, is a short term intervention, because getting money from reserves means there is a limit in advancement, an Economist has advised.
Emmanuel Zulu explained that pumping in of forex on the market entailed there was low supply of forex, owing to low output from major forex earners, which was the mining sector.
Mr. Zulu said that an economy must support itself to earn forex mostly from the productive sector and that it was only right for the Central Bank to act when there was high volatility on the exchange rate as it increased the inflation rate and that they have a mandate to keep inflation within single digit.
He told The Scoop in an interview that raising of the statutory reserve ratio aimed at lifting liquidity and the Monetary Policy Rate were stock up measures that could help until fiscal policy could accelerate production.
“If a country’s productive sector is not good, you expect your intervention to be short-lived. We might see that whatever gains being witnessed on the money market will get eroded as Zambia is import heavy,” Mr. Zulu explained.
He said that demand for the dollar was spinning up and that Zambia imported about 80% of commodities and that as a result, the country still had a lot of work to do in ensuring that sustainable ways of earning forex were put in effect.
The Bank of Zambia (BoZ) last week offloaded US$50.3 million into the market aimed at stabilizing the local currency.
ECONOMIST Kelvin Chisanga, has called for a stable local currency in order to strengthen the money market in the country.
Speaking to The Scoop, Mr. Chisanga said that the sudden appreciation of the Kwacha was not sustainable as it was not backed by any key fundamentals.
He said that once the currency was stable, it would indicate clear benchmarks of performance unlike facing it with uncertainties, a situation he said would negatively impact business.
“Though the local currency has shown relatively a positive signal for the market that it can turn toward creating positive reviews. It is key that it maintains stability,” Mr. Chisanga said.
He observed that the Kwacha’s performance against the US dollar was set to be faring between gains and losses as witnessed by the trading session observed last month.
He stated that with the current economic happenings on the Government side, especially with the kind of 2024 budget in sight, it was only fair that the economy was considered with much seriousness.
“In the past months, the Kwacha has been seen having continuous exercise of depreciation which was strongly rolling down on many aspects within the economy, pushing inflation away from policy corridor,” he said.
He said that it was difficult for the Kwacha to maintain stability as the Zambian economy faced many factors.
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