By MAIMBOLWA MULIKELELA –
THE Bank of Zambia (BoZ) will continue monitoring the performance of the Kwacha and interacting with market players to ensure the local currency stabilises.
The BoZ said its ultimate goal is to guarantee the Kwacha weighed on a balance and its volatility against major convertible currencies cushioned.
BoZ Governor Denny Kalyalya said in an interview that the major contributor to the poor performance of the Kwacha could be traced to low levels of exports compared to imports.
“We are not aiming at a particular rate because if we do, that will be artificial. The Kwacha finds its place depending on the supply and demand in the market so what we monitor mostly is the volatility. It should not be swinging so much from one position to another but get it to settle at a particular point or in a particular range,” Dr Kalyalya said.
Dr Kalyalya said in an interview while in Washington DC recently that Zambia was not exporting goods therefore impacting on the supply of foreign exchange.
“We are not exporting as much as we are supposed to. This means that foreign exchange supply is low and we have an appetite for foreign goods thereby the demand is growing so we need to strike the right balance in terms of what we export and what we demand for,” he said.
Dr Kalyalya said exports were the only sure way to get more foreign exchange in order to have a stable currency.
The BoZ had put in place various measures to manage the volatility but not necessarily to hold the Kwacha at a particular exchange rate.
Dr Kalyalya said on a day-to-day basis, the Central Bank was actively participating in the open market operations where it injected and withdrew liquidity in the market.
Recently, the BoZ raised the amount of money that commercial banks were required to deposit with it to 18 per cent in a bid to address the local currency’s volatility.
The Bank increased the statutory reserve ratio from 14 per cent to 18 per cent.