Maravi

Campaign financing did not affect kwacha liquidity, says Fundanga

Campaign financing did not affect kwacha liquidity, says Fundanga
Written by Chiwoyu Sinyangwe
Wednesday, November 12, 2008 8:47:35 AM

THE recent resurgence of the local currency against major convertible currencies has not in any way been influenced by perceived low kwacha liquidity, the Bank of Zambia (BoZ) has explained.

And the kwacha's strong performance on the foreign exchange market has continued with the local currency expected to consolidate around K3, 900 against United States dollar in the short term.

Some market analysts recently contended that the rapid appreciation of kwacha against the United States dollar in the aftermath of the October 30 presidential election was partly due to low kwacha liquidity as a lot of the local currency was taken out of commercial banks and poured into political campaigns.

But BoZ governor Dr Caleb Fundanga said campaign financing was sourced from the money already in the economy and does not reduce kwacha liquidity.

"It is also important to note that although campaign expenditure by the political parties did increase, it does not in itself lead to low kwacha liquidity," said Dr Fundanga. "Campaign financing is sourced from the money already in the economy and does not reduce kwacha liquidity in the economy. To the extent that local currency is spent during the campaigns can only increase the currency in circulation, thereby raising liquidity in the market, which would ordinarily result in currency depreciation and not appreciation.”

And the kwacha which recently dipped to a low of around K4,700 against the United States dollar has continued in its path of recovery, holding at an average of K3,900.

According to the Standard Chartered Bank daily market update, the market is slowly consolidating around the K3, 900 levels.

“This week, we expect to see increase in dollar flows on the market in preparation of tax payments,” the commentary read in part. “We expect the market to trade around K3, 850 and K3, 970.”

Labels: CALEB FUNDANGA, INFLATION, KWACHA

posted by MrK @ 8:49 AM