LUSAKA (Reuters) – Zambia’s kwacha weakened nearly two percent against the dollar on Tuesday in a technical correction as traders remained wary of a row between the government and mining firms over royalties.
By 1000 GMT, the kwacha was trading 1.74 percent weaker against the dollar at 7.0050.
Zambia kwacha strengthened last week after the government relaxed rules that had prevented $600 million in tax refunds being paid to mining firms, bowing to industry pressure over looming job cuts and mine closures.
“The appreciation last week was largely driven by sentiment after the government revised the VAT refund rules. The appreciation was too dramatic, it is difficult to sustain sentimental gain,” currency trader Maambo Hamaundu said.
“Today the kwacha is just trying to go back to the correct levels due to unresolved issues with the mines, reduced forex inflows and lower copper prices.”
The country’s tussles with miners over value added tax (VAT) as well as royalties have threatened investment and growth in one of Africa’s most promising markets and come at a time when copper prices are near 5-1/2 year lows.