By KENNEDY MUPESENI –
AFINANCIAL analyst has attributed the current depreciation of the Kwacha against major convertibles amid rising copper prices to increased imports and delayed International Monetary Fund (IMF) financial support.
Maambo Hamaundu says that the poor performance of the local currency could be attributed to the two factors.
Ideally, the current high prices in copper should have pushed for more dollar inflows thereby causing the appreciation of the local currency.
But a check, yesterday at some bureaux at Kitwe’s central business district indicated the dollar being bought and sold at K9.80 and K10, respectively down from an average of K9 to K9.50 last week.
This is with copper prices on the international market standing firm at US$7,128 per tonne, according to Reuters.
Mr Hamaundu observed that increased imports associated with the months preceding the festive seasons and the delayed IMF programme might have dealt heavily on the Kwacha despite the country earning more dollars due to improved copper prices and volumes.
“The performance of the local currency against major convertibles is to do with demand and supply of the foreign currency. In this case I suspect that since in this season people import more to have more
stock during festivities as we approach Christmas and New Year, the dollars might be in short supply.
“The other issue might be the delay of the negotiated concession loan from the IMF which can cause investor confident leading to some of the investors and companies withholding capital thereby lessening the flow of dollars for example in the economy,” he said.
Mr Hamaundu said in an interview yesterday that the structure of the economy was such that it was highly dependent on imports thus affecting foreign exchange inflows.
He admitted that the surge in the copper prices which had shown stability in more than six months should have improved the foreign exchange market.
“Commodity prices on the international market have been sustained for long period of time, because the copper price has been on the upswing as it takes not more than a month to generate foreign exchange receipts …,” Mr Hamaundu said.