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Zambian Kwacha Faces Moderate Stress Amidst Economic Challenges

The Zambian Kwacha continues to grapple with moderate stress, impacting the performance of the local market as it faces pressure against major currencies, particularly the reserve currency.

According to economic analyst Mr. Kelvin Chisanga, the currency’s struggle comes amidst a backdrop of subdued demand for foreign exchange, despite expectations of export growth in the country. This imbalance between demand and supply has contributed to the Kwacha’s weakening position.

Mr. Chisanga highlights that the current pressure reflects seasonal trends within the local economy, with heightened demand for foreign currency. Urgent measures are needed to curb this widening gap to prevent further distortion of the economic growth trajectory.

Import cover, although slightly above the required minimum of three months, does not seem to alleviate the situation. Mr. Chisanga emphasizes the importance of active participation from various economic agents to stabilize the foreign exchange market effectively.

Interestingly, Zambia is not alone in facing these challenges, as several regional countries are experiencing similar patterns due to perceived misalignments in trade balances. This shortage of foreign currency in conventional markets exacerbates the situation, leading to unfavorable conditions.

Mr. Chisanga suggests that regional cooperation and strategic forex market strategies are essential to address these issues. Restricting outflows to regional markets, both at personal and corporate levels, could help rebalance trade and increase regional participation in forex fundamentals, ultimately working towards normalization of the current trend.

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