Zambian Kwacha volatility fuels growth concerns 

Volatility in the Zambian Kwacha’s exchange rate against major convertible currencies is negatively impacting the economy, says Sean Tembo, the opposition leader of Patriots for Economic Progress (PeP).

The volatility is undermining the ability of businesses and individuals to make transactions, and leads to substantial FX losses for cross-border traders, Tembo added.

The PeP had raised concerns at the currency’s massive volatility in recent days, and Tembo conveyed his disappointment to the media at the Bank of Zambia (BoZ) for the lack of intervention to prevent the huge volatility in the Kwacha exchange rate.

Tembo stated: “Between Thursday, July 22, 2021, and Friday, 23rd July 2021 alone, the Kwacha moved from K22.67 to K20.96 to the U.S. Dollar as per BoZ website, which represents a 7.5% movement in a single day. It must be noted that one of the key mandates of the Central Bank is to maintain stability in the forex market and to intervene through Open Market Operations where necessary.  

“This is where the Central Bank either sells or buys forex from the open market so as to prevent the Kwacha from over-depreciating or over-appreciating, as the case might be, and therefore keep it stable,” he added.

The PeP leader said the 7.5% movement in the one day was unprecedented in regard to currency volatility.

“As Patriots for Economic Progress, we are fully aware of the fact that as we draw closer to the 12th August 2021 general elections, the PF and its government will become more and more desperate and will try to present a cosmetic view of the performance of the economy.

“This is evidently intended to misled voters so as to create a false perception that the economy is on a path of recovery when in fact not.”

Tembo went on to say: “The forex volatility is also undermining any prospects of growth that the economy might have had, as it will definitely keep away foreign investors who normally prefer a stable economic environment.”