By Dr. Lubinda Haabazoka
The Zambian kwacha has for the 5th straight day posted positive results against the US dollar.
Opening at close to k23 per dollar on Monday, the kwacha has been slowly but bullishly fighting back against the dollar breaking the k20 barrier by posting gains to reach k20,7 per dollar.
Domestic factors positively affecting the kwacha include increased forex inflows from tye mining industry amid the successful row out of the Covid 19 vaccination process. Exports of agriculture produce following yet another bumper harvest has also contributed to the Kwacha gain. Forex inflows attributed to the demand for cheaper Zambian goods amid price increases in the region have also positively affected the kwacha.
Government’s fiscal policies and the Bank of Zambia’s monetary policy have also managed to contain the negative effects of Covid 19 thereby setting a positive trajectory for Kwacha strength. The Bank of Zambia continued gold purchases has also increased investor perception as gold reserves are now forming a credible indicator of economic growth.
Non domestic economic factors positively contributing to the appreciation of the Zambian kwacha include among others: the relatively peaceful environment during the election period, investor confidence in the governance structure of the country as Zambia was highly exposed to the international community during the mourning period of our beloved First Republican President.
The commissioning by President Edgar Lungu of the 750 MW Kafue lower power project has also enhanced investor confidence as Zambia is seen to be a major exporter of energy at a time countries like South Africa are experiencing massive load shedding.
Among global factors positively affecting the kwacha is the anticipated $650bn SDR issue to all member countries by the IMF in a bid to enhance global liquidity and kickstarting global economic growth. Zambia is expected to receive around $1.4bn pushing its reserves to above $3.1bn.
The South African looting incidence has also forced investors to look at Zambia as a base for their business activities in South Africa as Zambian authorities are perceived favorable when it comes to issues of peace and the handling of the Covid 19 pandemic.
Dr Lubinda Haabazoka is president of the Economics Association of Zambia.