BoZ acts to salvage weak Kwacha

THE Bank of Zambia (BoZ) has tightened the monetary policy and increased the statutory reserves as well as policy rate in an effort to support the Kwacha which is currently under pressure.
The Kwacha was yesterday trading at K6.0300./6.0400 at most bureaux de change.
BoZ financial markets assistant director Isaac Muhanga said measures have been taken by the central bank to support the local currency which had been depreciating for a long time.
Addressing journalist in Lusaka yesterday, Mr Muhanga said the policy interventions taken by the central bank would help support the Kwacha as effects arising from the measures would begin to be felt by next week.
Mr Muhanga said growth could only flourish where inflation was tamed and that their mandate was to contain inflation.
And Bank of Zambia director-economics Peter Banda said a number of factors had contributed to the depreciation of the Kwacha, mainly as a result of the strengthening of the United States dollar.
“The USA dollar has strengthened and the reason is that the USA Federal Reserve Bank has decided to reduce the amount of liquidity that it has been injecting through its monetary stimulus programme and we have seen a lot of currencies in emerging economies depreciate against the dollar.
“When you look at the price of  copper, at close of 2012, it was hovering around US$8,000 per tonne but in recent time, we are talking about the price being at US$7,100 per tonne so clearly copper being our main export you would expect that supply of dollars would be relatively lower compared to over a year ago,” he said.
He said Zambia had been recording significant growth and imports had also been growing, thereby, a demand of foreign currency and putting pressure on the exchange rate.
Mr Banda said the economy had been growing and that the Gross Domestic Product (GDP) rate over the past years has been nothing less than seven  per cent but that with the economy growing, it is expected to spur a significant increase in imports.
“Our fuel import bill has been growing, if you look at the mines, they have been using significant amount of fuels and the economy in general has been using significant amount of fuel; given that scenario our imports have tended to have grown faster than the growth in exports,” Mr Banda said.