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THE continued fall of the Zambian currency, Kwacha is as a result of several external factors that govern the world economy.
Understanding the dynamics behind such occurances will clear the blame and in a way invite ideas on how to mitigate the situation.
One contributing factor is the recent devaluation of the Chinese currency, the Yaun, and obviously Zambia being China’s business partner is affected.
The devaluation of the Chinese Yuan by about 2 per cent which was its largest single-day drop since 1994 took global markets by surprise.
As soon as China devalued their currency, market analysts got busy refining their assessments of what the devaluation and its timing meant for the likelihood and extent of a Chinese economic slowdown.
Zambia like other African countries who have taken China as Africa’s largest bilateral trading partner stressed that African exports went down.
Currencies in African countries with strong exports to China, like South Africa (gold and wine), Angola (oil), and the Zambia (copper) as a result got affected.
As by yesterday, the Kwacha was 8.7306 to one American dollar, 13.4565 to one British pound, 9.8045 to one Euro and 0.6548 to a South African rand.
In addition, the Yuan devaluation threatened to erode Africa’s competitiveness as domestic products faced stronger competition from cheaper Chinese imports.
While this move impacted badly on Zambia, other African countries like Ethiopia, Kenya, and Mozambique stood to benefit from the cheaper cost of Chinese goods that they import, such as Chinese-made heavy machinery, bulldozers, and electrical lines. African retailers and consumers will also have access to cheaper Chinese goods.
Zambia may not be worried because with such development, the Government should focus on the impact of this economic slowdown and the policy measures needed to manage it.
Zambians must be consolled by the fact that African countries trade with China mostly in American dollars since the Yuan is not internationalised.
Further, because the dollar has been appreciating against African currencies, the impact of the Chinese devaluation is less important for African countries than for America.
Before damning the Zambian situation, a look at our other bigger trade partner South Africa would give another dimension.
We may moan of the fallen Kwacha, but South Africa’s rand recently plunged to an all-time low last week breaching 14 to the dollar on the back of a global drop in commodity prices.
Undoubtly, the rand, which the currency of the continent’s most developed economy also suffered similar shocks like our Kwacha.
The rand has been under sustained pressure and is one of the worst hit out of 25 emerging market peers as jittery investors’ dispose of high-risk assets in the wake of slowing economic growth in China.
The South African government like Zambia got to work intervening in the foreign exchange market to ensure orderly market conditions.
What is happening at the moment as we earlier stated are effects due to world factors, it has very little to do with the domestic economy like the Zambian situation.
As recently observed by a local economic analyst, bringing back exports earnings in Zambia can help stabilise the continued free falling of the Kwacha.
Mr Yosuf Dodia’s views that local investors need to ensure that exports earnings are brought back to Zambia maybe one of the mitigation.
Mr Dodia who is Private Sector Development Association chairperson rightly observed that local banks should dialogue and ensure that export earnings are brought back to Zambia.
We, therefore, feel that what Zambia needs at the moment are ideas like those coming from Mr Dodia, rather than simply finger-pointing.
TimesofZambia
