Kwacha Faces Ongoing Challenges, Calls for Policy Support Amidst Seasonal Fluctuations

The Zambian Kwacha is navigating a challenging landscape, experiencing continuous losses for the 10th consecutive weeks, especially since mid-September. 

The third and fourth quarters have witnessed mounting pressure on the Kwacha against the US Dollar, with demand surging and the greenback maintaining dominance in the market, leaving the local currency vulnerable on a weekly basis.

Economic analyst Kelvin Chisanga delves into the intricate dynamics impacting the Kwacha’s performance. The limited availability of the Dollar on the local market, coupled with reduced economic production, takes a critical turn as the nation approaches the farming season. The demand for the US Dollar intensifies, weakening the Kwacha.

Chisanga’s analysis anticipates sustained pressure on the Kwacha in the foreseeable future, with the scarcity of global currency reserves significantly contributing to this strain. 

Additionally, the export sector’s reduced contribution, along with the mining industry’s subdued output, poses challenges for market confidence.

While Mr. Chisanga foresees the Kwacha trading in losses in the short term, he suggests a potential stabilization within a range-bound scenario, maintaining its current performance levels. 

However, improvements in supply signals could see the local currency sustaining around K24 per US Dollar by the end of the calendar year.

Looking ahead, Mr. Chisanga emphasizes the need for strategic interventions from key stakeholders, particularly the Bank of Zambia (BOZ). 

He calls for the establishment of a sustainable mechanism to bolster the Kwacha’s performance, providing resilience against economic shocks that might lead market fundamentals in an adverse direction.

The proactive approach, he suggests, is crucial for navigating the intricate challenges affecting the local currency.