Major foreign currencies continue to pressurize Kwacha

The Bank of Zambia says the Kwacha in the recent past weeks has come under pressure from major foreign currencies owing to low imports by the mining sector and COVID – 19 which has impacted global trade.

Bank of Zambia Acting Assistant Director Communication Bersnart Mwanza says the Kwacha depreciated by 8.0% to k19.81 per us dollar from k18.34 largely reflecting imbalances in the foreign exchange market.

In a statement sent to media yesterday, Ms Mwanza stated that the lower foreign exchange sales had been noted from the Mining sector as well as foreign financial firms who typically invest in Government securities.

Ms Mwanza explained that the reduced mining sector supply although pronounced in this period was consistent with the gradual reduction in exports in general.

She further explained that this was due to disruptions to international trade and the declining global growth due to the outbreak of Covid-19 pandemic.

She added that the operational challenges were at key mining firms who have been significant suppliers of foreign exchange in the past and have now compounded the situation.

“There has been significant increase in foreign exchange for the importation of agricultural inputs, health related supplies required to address the Covid-19 pandemic and the clearing of debts to suppliers.” She said.

Meanwhile Ms Mwanza stated that companies in June this year started paying all their statutory tax obligation in addition to the royalty mineral tax to the Zambia Revenue Authority (ZRA) through the central bank.

Ms Mwanza said in August and September the central bank has been able to provide foreign exchange liquidity back into the market to help meet the current significant increase in demand amidst reduced supply.

“In previous Monetary Policy Committee (MPC) statements, the exchange rate has had an important inflation outcomes, the volatility in exchange rate, while allowing it to adjust to market conditions, which is a critical ingredient in achieving and maintaining price and financial system stability,” Ms Mwanza lamented.

This is contained in a statement sent to ZANIS by Bank of Zambia Acting Assistant Communications Manager Bersnart Mwanza.