CURRENCY: Pressure on the currency in Africa’s copper producer Zambia, is expected to detente as the recent sterilization measures transmit to the currency markets. Closing Friday 23 November at highs of 14.35 in bid, the copper currency pressure is forecast to ease as the effects of the 125 basis points benchmark interest rate hike to 11.5% and the 1,000 basis point hike on the overnight emergency funding rate to commercial banks to 28%, start to manifest. Zambia grapples with a sliding currency given rise in dollar demand to fund the energy sector at a time when its reserves have fallen to under one and half yards (1.6 months of import cover). Currency risks have elevated threatening the debt to gross domestic product growth rate to above 76% given the current exchange rate. The central bank offloaded dollars on the open market to ease pressure on the Kwacha. The red metal currency is expected to reserve some of its losses this week.
INFLATION: As a consequence of currency weakness in the month of November, inflationary pressures remains high from all fronts range from energy to import transmission. Zambia last printed inflation at 10.7% which is forecast to widen 50bps -70bps to between 11.2% – 11.5% to be announced by Zambia Statistics Agency (ZSA) on Thursday 28 November this week. Same time under similar conditions in 2015 inflation was at 19% during the Kariba crisis.
PRIVATE SECTOR PULSE: With a rising inflation environment and currency weakness adding to energy load management woes, private sector pulse is expected to deep in contraction next week when Markit Economics release November PMI headline readings. A forecast of 46-47 is expected from the October 48.3 levels.
The Kwacha Arbitrageur
