Zambia has very robust policy frameworks but their weak implementation is causing currency risks through exchange rate depreciation the central bank advised. Speaking on state television, Director Financial Markets Isaac Muhanga said the lack of implementation of the policy frameworks the copper producer has is the reason for the currency slide that has seen the Kwacha trade at all time lows.
“Zambia runs a free float exchange rate regime and fluctuations in the pricing reflects some anomalies in macroeconomic stability as a result of weak implementation of policy frameworks,” Muhanga said. The central bank can institute measures in the interim such as tightening monetary policy but all these are unsustainable because a longer term fix would be to address local productivity to cushion some of the vulnerabilities the country faces, he said.
The Financial Markets Director said Zambia exports most of its commodities and because of this the exchange rate as a pressure valve was reflecting this through the fluctuations.
And financial analyst Noel Nkhoma representing the private sector said the problem was with the fiscals which have ballooned due to aggressive infrastructure spend which the economy is now bearing the brunt of.
“Zambia’s Policy frameworks such as the Medium Term Expenditure Framework (MTEF) and the Seventh National Development Plans (SNDP) address industrialization but have not been implemented fully. This issue needs political will and we call upon the President to take charge and make his ministers accountable to address this issue,” Nkhoma said.
“Lack of activity in the economy and over dependency on imports is a big structural problem the SNDP provides for industrialization and import substitution, the debt servicing component has constrained the economy, Nkhoma said. Government is not walking the austerity talk as vividly spending levels do not reflect a struggling fiscal position. There is need to outrightly cut down on expenditure. There’s is just much the central bank can do the problem is a fiscal issue, he said.
Zambia grapples with a sliding currency, double digit inflation amidst an energy crisis as climate change effects weigh.
The Kwacha Arbitrageur
