The Central Bank has said it will use all available interventions to stabilize the foreign exchange market which has seen the kwacha depreciating to nearly K20 against the US dollar.
In a statement issued today, the Bank of Zambia revealed that the local currency depreciated by 8.0 percent between August and September 14, 2020.
“In the recent weeks, the Kwacha has come under renewed pressure. Between mid August and September 14, 2020, the kwacha depreciated by 8.0 percent to K19.81 per US dollars from K18.34, largely reflecting imbalances in the foreign exchange market. On the supply side, lower foreign exchange sales have been noted from the mining sector as well as foreign financial firms who typically invest in government securities. The reduced mining sector supply although pronounced during this period, is consistent with to gradual reduction in exports in general,” the BOZ stated. “As has been indicated in the previous Monetary Policy Committee statements, the exchange rate has been an important impact on inflation outcomes. Allowing volatility in the exchange rate, whilst allowing it to adjust to market conditions, is therefore, a critical ingredient in achieving and maintaining price and financial system stability. The Bank of Zambia will continue to use all available Monetary and foreign exchange interventions options, as appropriate, to address adverse developments in the foreign exchange market. On demand side, there has been a significant increase in foreign exchange requirements for the importation of agricultural inputs, health related supplies required to address Covid19 pandemic and procurement of petroleum products.”
BoZ states that it has been able to provide foreign exchange liquidity back into the market.
“In August and September, the Bank of Zambia has been able to provide foreign exchange liquidity back into the market to help meet the current significant increase in demand amidst reduced supply,” the BoZ stated.