After opening at 14.65 levels, the currency in Africa’s red metal producer Zambia, has widened its loss streak after sliding 2% to breach the 15 new psychological mark in intraday trade on 05 December. Rising dollars demand exacerbated by energy and agriculture funding needs has persisted causing the copper currency to shave significant value in today’s trading. Asset sell off pressure is becoming a pressure point from offshores especially those that want out of Kwacha positions in govies and those whose maturities could not be reinvested after bid rejections in pricey bids in last Thursdays auction.
“The festivities haven’t made it any better as most retailers and wholesalers are stocking up on inventory to meet demand this season,” a trader said in Lusaka in a note.
The central bank intervened the markets hiking the benchmark lending rate 125bps to 11.5% and the overnight emergency funding rate 1,000bps to 28%. Zambia’s reserves have fallen to decade lows of below one and half yards representing 1.6 months of import cover which has impacted the central banks ammunition capacity to intervene by selling dollars in the open market as they manage the risk of depleting this cover.
The copper producers economic woes have been further compounded by a deepening energy poverty given climate change effects as dam levels recede to lows affecting energy generation at the Kariba, Kafue gorge and Itezhi tezhi.
Zambia’s debt to gross domestic product is set to widen to 76% at the currency exchange rate.
The Kwacha Arbitrageur