Zambian Kwacha Strengthens on Seasonal Inflows, But Medium-Term Risks Persist

The Zambian Kwacha is expected to continue its modest appreciation in the short term, thanks to seasonal tax inflows, mining sector dividends, and strong performances in agriculture, says economic analyst Kelvin Chisanga. However, he cautions that the currency’s recent stability may not last beyond the June tax season.

Mr. Chisanga attributes the current momentum to increased foreign exchange (FX) supply, notably from the ongoing tobacco season, which has bolstered liquidity and supported positive market sentiment. 

“The FX market is currently benefiting from tighter liquidity, aided by agriculture receipts and mining dividends, offering a near-term cushion for the Kwacha,” he noted.

However, he warned that this trend might reverse post-August. “As we move into mid-September, we expect companies to resume import activity and repatriate profits, which will likely increase dollar demand,” he said.

External factors also pose significant risks. Copper prices, Chinese demand for Zambian exports, and critical IMF-related decisions—such as debt restructuring and disbursements—will influence the Kwacha’s performance.

Mr. Chisanga also flagged potential depreciation triggers for the latter half of 2025, including higher import volumes, elevated oil prices, inflation, and electricity supply challenges. “The planting season will increase demand for farming inputs, which means more dollar outflows,” he added.

He emphasized that the Bank of Zambia’s monetary stance will be crucial. “If policy is loosened or expected forex inflows fall short, the Kwacha could come under renewed pressure,” Chisanga warned.

In conclusion, while the short-term outlook remains cautiously optimistic, Chisanga urged policymakers and market participants to prepare for medium-term headwinds. 

“The future of the Kwacha depends on maintaining a fine balance between domestic discipline and favorable global conditions,” he stated.