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Zambian Kwacha Hits 7-Week High As FX Curbs Bite
Zambia’s kwacha rallied to its highest level in nearly two months on Monday, driven up by a new law limiting the use of dollars in Africa’s top copper producer that has forced locals to convert hard currency into kwacha, analysts said.
Image: Reuters
Commercial banks quoted the kwacha at 5,110/5,160 to the dollar, compared to Friday’s close of 5,140. It traded at a session high of 5,105, a level last seen on May 11, when it traded at 5,080 to the dollar.
A new regulation requiring domestic transactions to be quoted or paid for in kwacha has increased demand for the currency, said Leon Myburgh, sub-Saharan Africa strategist at Citi.
“That forced some people in the economy to start transacting in kwacha, which meant they had to convert their dollars to kwacha to be able to transact,” he said.
The regulation came into force on May 18 and prohibits the use of foreign currency to buy domestic goods and services. Penalties include up to 10 years in jail.
The policy was intended to limit the common practice of quoting goods and services, such as health and education, in dollars instead of kwacha, Myburgh wrote in a recent research note. However, the Bank of Zambia has said there will be no restrictions on Zambians holding foreign currency.
Absa Capital said increased capital requirements for local and foreign banks were also helping to bolster the kwacha.
This would not only “drain kwacha liquidity, but cause these banks to convert some of their dollars into kwacha by year-end, which are both ZMK positive,” the bank said in a research note.
The kwacha has strengthened in the last seven weeks despite a fall of nearly 5 percent in the price of copper, Zambia’s main export, due to slowing demand from China. Copper was quoted in London at $7,641 per tonne on Monday from $8,013 on May 11.
Citi said Zambia’s trade account was also a cause for long-term concern given strong growth in imports resulting from increased government spending under President Michael Sata, who came to power in September.
“Imports are growing very robustly and copper production, specifically the value of copper exports, has not gone up, which has meant that the trade account has shrunk from a healthy surplus to a small surplus,” Myburgh said.
“If anything, the risks are for kwacha depreciation, not kwacha appreciation.”
Citi is forecasting a surplus of 1.2 percent of GDP in 2012, down from an average of around 4 percent in 2009-11.
businesslive.co.za
Posted by
commando
July 4, 2012 at 5:16 pm
This is good to me. I can see this change for real.
top kat
July 4, 2012 at 6:40 pm
the article by David Panabantu in todays daily mail makes alot of sense.if th mines are included in ths forex transaction ban, then th zambian kwacha is in for a huge and massive appreciation.jus hop th govt has th guts to stand up to these multi national mininig firms.
nckbnd
July 4, 2012 at 7:46 pm
this is goodnews indeed more especially us business men and women. hope hungry hyena (hh) wil appreciate de govt for banning pipo to cult de prices in $dollars!
MUNYELO PWETE!
July 4, 2012 at 8:32 pm
Lets keep on cruising Your Excellency! Under 5 Kadansa and his friend holy ghost fire can continue waffling! Infact this new law will benefit tuntemba for kadansa. As for holy ghost fire, he needs redemption!
Zambiana
July 4, 2012 at 8:41 pm
My GRZ at work, led by my prezo, Michael C. Sata. Any arguments?
Barotse diaspora
July 4, 2012 at 10:02 pm
Kwacha appreciate alot more sothat HH Can choke with envy and disgrace.lets go PF! Lets go!
BA KAONDE
July 5, 2012 at 1:21 am
This is good news indeed
chela
July 5, 2012 at 3:10 am
this is a working govtmnt indeed.why didnt bwanzine think like this? anywere,Go pf Go
ziman
July 5, 2012 at 6:00 am
Dollar hit 5,000 in RB’s Govt. Not this crap the Cow herders want to peddle thru ka HaHi.Shaaa!
Cozmokaojr
July 5, 2012 at 8:34 am
Man of action niziii. Hungry haina kadansa h5 atishani apooo.
Big Ken
July 5, 2012 at 9:49 am
Now the Govt must make sure Mines give business to the local contractors. It will strengthen the ZMK further.
mwale dominic john-Gambia
July 5, 2012 at 11:50 am
I also appreciate the efforts made by our president to strengthen the zam currency.Even elsewhere in the world goods are quoted in the countries currency and not in Dollar or Euro.Even when someone sends money in dollar currency to a family in a different country,the money will not be given in dollar currency but in that country’s currency.This is the best policy in the PF govt.Am happy to hear about this policy.Go go Sata push zambia to the greeter highest.regards Zambia
isaac
July 5, 2012 at 12:09 pm
That quite positive move. We need this kwacha to be strong am sure it will hit 4500 in two months time.
Tupac
July 5, 2012 at 1:34 pm
Hungry Hyena(HH)must now be choking with envy cobra is humble,listening and not pompous like the chap on top.Look now more mullar ill go to tha defence forces anatha job creation.Just wait very soon you ill see bakembo.Alex shikulu balange ati ipala lyobe telyafye ngaba sitombwako.
evangelist stanley . n
July 7, 2012 at 12:35 pm
it’s a small thank u to GRZ but we need to do more and fight to the level of Tanzanian Shiling and Pula of Botswana in terms of economy that’s when we can see real sense otherwise may the GRZ keep on the fight. set a target for the last quarter of this year.
NDELOLESHA FYE
July 7, 2012 at 3:38 pm
CHI CHI BABY MWAUME NI ZII, PLUS ALEXANDER CHIKWANDA NEXT 3 MONTHS K3OOO TO A DOLLAR!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Against monkey invasion
July 8, 2012 at 8:20 pm
Imwe ba kolwe.i thot this article points out yo failures. did u realy go 2 sch or yo ears ich 2 hear praises 4 yo brainless president,CNP . but alas,u wont get them becoz this govt is so dull. 1.what does ‘high’ means. 2. i thot the dolla was at k4,860 whn u kem in2 power. 3. the article points out that CNP ova spends. kwena mulifikopo imwe bakolwe.
Sirr
July 10, 2012 at 7:57 am
@ ‘Against Monkey Invasion’, mwitumwenamo 4 being hapy.dis article daz nt point failure bt progres.yes wen presido kem in power de kwacha was @ k4,860 & den incrizd 2 k5,200. So den, de dcriz frm k5,180 to k5,000 shows dat kwacha is startin 2 gain power once again.@ its current rate of apreciation, OUR kwacha wil b stronger sooner than xpectd due 2 new policy by presido.i hop u undastand now.