Bank of Zambia Governor Denny Kalyalya says the country’s balance of payments position has deteriorated reflecting a widening current account deficit.
Dr Kalyalya says this has resulted in the Kwacha being on a depreciating trend.
In a statement to QFM News today on the recent developments in the foreign exchange market, Dr Kalyalya says Zambia remains vulnerable to developments in the global economy.
He explains that following anticipation of the rise in US interest rates by global investors, emerging markets have experienced systematic net outflows of capital, creating pressure on their currencies to depreciate.
The Central Bank Governor points out that more recently; the Kwacha has come under immense pressure, largely emanating from global economic and financial market developments associated with slow growth in China, the second largest economy after the US.
Dr Kalyalya adds that commodity prices including Copper have dropped with the Zambian economy impacted adversely through the decline in the price of copper,which has fallen to around US$4,900 per tonne from above US$6,500 per tonne in 2014.
He states that these developments apart from underscoring the long overdue need for diversification of the economy to reduce dependence on copper.
He adds that they also provide an opportunity for the country to take practical measures to respond to the challenges of diversification.
Dr Kalyalya says difficult as the situation is,it is an ideal time to actualize this structural transformation.
He further states that the movements in the exchange rate are sending clear signals that the economy needs an expanded export base and a reduction in unnecessary imports.
The Central Bank Governor notes the need to engage in expenditure-reducing and expenditure-switching activities going forward.