Maravi

IMF observes pressure in foreign exchange market

IMF observes pressure in foreign exchange market
Written by Chiwoyu Sinyangwe
Thursday, March 05, 2009 9:59:52 PM

PERSISTENT uncertainty about the global economic prospects and their impact on the domestic economy has resulted in intense pressure in the foreign exchange market, the recent IMF team to Zambia has observed.

And the IMF has predicted that the country’s economic growth is this year going to slow down on account of the global financial crisis.

According to a statement issued at the end of the visit by the IMF team to the country between February 18 and yesterday, mission chief for Zambia Francesco Caramazza stated that IMF was happy with the response of the Central Bank towards the foreign exchange market.

Caramazza stated that the exchange rate in the country would continue to be market-oriented and that since October last year, the kwacha had depreciated broadly in keeping with the changed fundamental determinants of the exchange rate.

“Persistent uncertainty about global economic prospects and their impact on the domestic economy, in a thin market with volatile expectations, has, at times, resulted in intense pressure in the foreign exchange market,” Caramazza stated. “The Bank of Zambia has responded appropriately to exchange market pressures by providing, when, necessary, foreign exchange to the market from reserves it has built up in recent years.”

The team also indicated that the IMF was ready to increase the lending portfolio to the country under the Poverty Reduction Growth Facility (PRGF) as a way to assist the local economy deal with the current effects of the economic crunch.

“To ease the adjustment to the external shock Zambia has experienced and support the Bank of Zambia’s ability to maintain orderly foreign exchange market condition, the IMF stands ready to provide substantial additional balance of payments support to PRGF arrangements,” according to the statement.

The mission team also announced that it had agreed with the government on structural measures for this year to complement the macroeconomic framework.

“The programme will continue to focus on improving public financial management, advancing financial sector development, and implementing polices to ensure an adequate and reliable supply of electricity,” the statement read.

And the IMF has observed that Zambia will this year record reduced economic growth as the copper mining sector had been the hardest hit by the current global economic crisis.

The IMF team however praised the policy response the government was making towards the expected decline in economic activity.

Labels: FOREX, GREAT DEPRESSION II, IMF

posted by MrK @ 10:00 PM