As festivities draw nigh, more and more retailers are looking to stock up on their inventory to meet Christmas demand. This is expected to add more pressure to the Kwacha as demand for foreign exchange widens. Zambia is already faced with increased dollar demand for external debt service from its finance Ministry and that from the central bank to shore up falling reserves to improve a weakening import cover.
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“The Bank of Zambia has been a major off-taker for dollars as it attempts to increase reserve levels which currently sit at $1.45 billion,” an unnamed trader said in an interview.
Other sources of foreign currency demand include the energy sector for both crude importation and the payments of power arrears to Eskom. Africa’s copper producer is said to expend $21 million monthly for energy (electricity) imports to fund the 300 MW imports aimed at plugging the power bottlenecks it experiences.
The red metal currency has been under pressure pushing north of 13.5 for a dollar having closed Friday 08 November at 13.7. The Kwacha is expected to trade within a range of 13.75-13.85 in the week.
Markets will be looking to the rate decision meeting coming up next week 18-19 November should the central bank decided to curb the currency slide.
The Kwacha Arbitrageur
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