Zambian President Michael Sata has attributed the recent depreciation of the national currency, Kwacha, to a combination of domestic and international market developments.
President Sata said the US Dollar has broadly strengthened against other currencies following the US Federal Reserve Bank’s decision to reduce the amount of liquidity it injects into the economy through its monetary stimulus programme (commonly referred to as Quantitative Easing).
The Kwacha Monday was trading at K5.801/K5.811 to 1US$ for buying and selling, respectively.
The President said as a result of the US measure, the emerging market currencies have generally depreciated against the US Dollar.
He cited the Ghanaian Cedi and South African Rand which, he said, have depreciated by 5.5 percent and 4.7 percent against the US Dollar, respectively, since the beginning of the year.
In comparison, the Kwacha has weakened by 4.3 percent against the US Dollar over the same period, the President said.
“In fact, since the beginning of the year, the Kwacha has appreciated by 0.5 percent against the South African Rand to trade at K0.52/Rand as at 20th February 2014. Secondly, economic activity has generally been steady in the recent past and in order to support this, there has been increased demand for capital imports, which has increased demand for foreign exchange,” President Sata said in his Facebook posting Monday.
“Let me assure the nation that our Government is closely monitoring the developments in the foreign exchange market and has in this regard tightened monetary policy consistent with the attainment of the inflation target of 6.5 percent for 2014,” he added.
President Sata, however, said the country’s Non-Traditional Exports (NTEs) have been on the rise and increased by 27 percent to US$3.6 billion as at 31 Dec. 2013.