Bureaux de change association chief optimistic over kwacha gain

Bureaux de change association chief optimistic over kwacha gain
Written by Florence Bupe
Monday, August 24, 2009 6:35:35 AM

ASSOCIATION of Bureaux de Change of Zambia president Paul Kalumba has expressed optimism that the kwacha will in the short term maintain its appreciated levels.
Kalumba, however, emphasised that the strengthened performance of the local currency was largely dependent on determining factors such as offshore investment levels and improved copper prices.

“As you have seen, the kwacha has been appreciating against the US dollar. In the short term, this trend is likely to continue if the determining factors hold,” he said.

Kalumba said one major factor which was likely to impact on the performance of the kwacha was the inflow of investments by offshore players.

He said the kwacha’s performance against the greenback had improved because of increased offshore investments.

“We have seen that there is renewed interest in emerging markets from offshore players. This is evidenced by the significant increase of offshore players buying our government bonds,” Kalumba said. “This alone is bringing in US dollar liquidity, and thus we are able to meet local demand for the greenback.”

Kalumba also attributed the appreciation of the kwacha to surging copper prices on the international commodities markets.

Copper prices have over the last few weeks gone up to trade above US $6,000 per tonne level, hitting ten month highs.

Kalumba also explained that the Special Drawing Right (SDR) granted by the International Monetary Fund (IMF) to emerging economies aimed at boosting economic growth would also impact positively on the performance of the local unit.

“Over the last year, the overall SDR pool has been increased from K33 billion to K283 billion. This is a great chunk of newly printed US dollars, and Zambia is certainly a beneficiary to this new-found reserve. The cost of these funds is priced at 0.3 per cent, which is technically virtually free money,” he said.

Kalumba further said the anticipated bumper harvest in the country would positively impact on the kwacha because it meant that the country would be exporting rather than importing grain.

However, Kalumba noted that the upward adjustment in electricity tariffs that was effected this month may negate gains realised from positive trends taking place in the country’s economy.

In the long term, however, Kalumba explained that the standing of the kwacha remained hazy for as long as the manufacturing sector was not boosted.

The kwacha last week traded in the K4,750 to K4,850 range.