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Zambian Kwacha Faces Strain

The Zambian Kwacha is grappling with a persistent shortage of US Dollars in the local market, resulting in continuous depreciation, with a cumulative loss of about 25% since the beginning of the year. 

In light of these challenges, Economic analyst Kelvin Chisanga suggests urgent measures to stabilize the Kwacha and curb the current downward trend.

Mr. Chisanga proposes that the Bank of Zambia (BOZ) should consider lifting trading limits on the US Dollar, particularly targeting areas with high-dollar transactions such as the Kasumbalesa border post. 

This border post, known for substantial Dollarized transactions, could serve as a potential source to counteract the depreciating Kwacha.

Another crucial recommendation involves implementing interest rates on CFC (Convertible Foreign Currency) accounts. 

Mr. Chisanga argues that this policy would encourage a return on Dollar inflow and promote saving investments, as businesses would be compelled to retain Dollars in their accounts. 

Currently operating interest-free, CFC accounts are seen as hindering healthy Dollar inflows.

Furthermore, he stresses the importance of monitoring annual and perennial purchases, especially during the third and fourth quarters of each calendar year. 

By doing so, he said the country can alleviate unwarranted pressure on its hard currency, particularly in the face of significant demands for agricultural input importations. 

Additionally, a more strategic approach to fuel purchases, incorporating contractual agreements to counteract sharp changes in oil prices, is recommended to stabilize the Kwacha.

Mr. Chisanga emphasizes the need for proactive measures, especially during the final months of each financial year, when the demand for hard currency intensifies. 

The lack of a sustainable trading pattern in the local forex market, attributed to imbalances in export and import dynamics, necessitates a comprehensive approach to ensure stability, he stated.

As Zambia faces economic challenges, Mr. Chisanga urges stakeholders  to consider these proposals to safeguard the Kwacha from further depreciation and foster a more resilient and balanced economic environment.

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