‘Kwacha has not benefited from rising copper prices’
‘Kwacha has not benefited from rising copper prices’Written by Florence Bupe
Friday, April 17, 2009 2:23:14 PM
ASSOCIATION of Bureaux de Change Paul Kalumba has observed that the kwacha has not benefited from the rising copper prices because the mines have continued to be controlled by foreign investors.
In an interview, Kalumba said the performance of the kwacha on the foreign exchange market was not correlating with trends on the international market because there were no measures in place to ensure that profits were retained within the internal economy.
“Prices of copper have over the last few weeks gone up, but we haven’t seen a correlation in the performance of our local currency,” Kalumba said. “We have a situation where copper prices have gone up by about 30 per cent from January to date, yet the kwacha has continued to be under pressure, and this has left the market confused.”
Kalumba, who is also Golden Coin Bureau de Change director, said for as long as Zambia lacked measures that ensured that revenue from the mines was circulated within the economy, the upcoming positive trends on the international commodity market would have little or no impact on the strength of the kwacha.
The local currency has over the last few months come under a lot of pressure from the greenback, and is currently in the range of K5,600 and K5,700 against the US dollar.
Kalumba said there was need for financial market regulatory bodies to be more involved in intervention steps to save the kwacha from further collapse.
“When our currency is pressed, the Bank of Zambia intervenes, but the question is how sustainable this intervention is considering our low reserve levels of just over US $1 billion,” he said.
Kalumba advised that measures should be put in place to ensure that the performance of the kwacha matched market trends.
And Kalumba said it was not prudent for banks to consider raising base rates when the country’s inflation rate was reported to be declining.
“The bank lending rates should show a relationship with the current inflation rate. So for banks to start talking of raising base rates when we are saying the rate of inflation is going down is not right,” said Kalumba.
Labels: BANKING, INFLATION, INTEREST RATES, KWACHA, NEOLIBERALISM, PAUL KALUMBA
posted by MrK @ 1:24 PM
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