The head of Zambia’s central bank on Wednesday attributed the volatility of the local currency to instability in the Eurozone caused by Greece’s financial instability.
Bank of Zambia (BoZ) Governor Denny Kalyalya further said an economic down turn in China has also caused the local currency to go on a downward spiral in recent months.
The central bank chief said in a press briefing in Lusaka, the country’s capital that the two factors, coupled with a decline in copper prices on the international market have resulted in the US dollar strengthening against other convertible currencies, including the Kwacha.
This, he said, has led to reduction in foreign exchange inflows forcing the Kwacha to depreciate but indicated that the central bank was looking at ways to cushion the local currency from further depreciation.
He further said the country needed to take the diversification of the economy from dependence on copper seriously as this has made the country vulnerable to international shocks.
The Zambian currency has come under pressure this year reaching a record low of 7.89 Zambian Kwacha per dollar on July 15. However the currency has seen some improved performance this week and traded at 7.44 Kwacha a dollar on Tuesday.
Analysts have said the currency will remain bullish against the dollar due to sustained foreign inflows as companies prepare to meet month-end payment obligations.
Zambia’s dependence on copper as its main foreign exchange earner accounting for 70 percent of foreign exchange earnings affects Africa’s second largest copper producer during times of low copper prices. Enditem