Kwacha appreciated by 10.4 in 2016

Sat, 31 Dec 2016 10:00:28 +0000

By BUUMBA CHIMBULU

THE Kwacha in 2016 between January and November appreciated by 10.4 percent against the United States dollar owing to the tight monetary policy measures introduced by the Central Bank among other reasons, the World Bank has revealed.

The bank said much as the Kwacha had continued to fluctuate against its major trading currencies, it was stronger and less volatile the first nine months of 2016 compared to 2015.

This is according to the bank’s 2016 8th Zambia economic brief-raising revenue for economic recovery.

“Between January and end of November 2016, the Kwacha has appreciated by 10.4 percent against the dollar, 13.2 percent against the Euro and 2.1 percent against the South African Rand,” said the bank.

The bank attributed the relative stability to the tight monetary policy measures introduced by the Bank of Zambia in November 2015, which continued to have an impact on the market during 2016.

It also attributed the stability to reduced demand for imported goods, resulting in less demand for foreign currency.

The bank explained that foreign currency inflows in the first half of 2016 were US$397 million, 20.3 percent less than the level in the same period in 2015.

According to the bank, the return of foreign interest in the local currency-denominated bonds at the August 2016 auction equally contributed to the stable performance of the Kwacha in the period under review.

“The other reason for the appreciation of the Kwacha is a perception that the economy has weathered the tougher part of the shocks and that an IMF support economic recovery plan is likely,” said the bank.

The World Bank also observed that tight monetary policy had tamed inflation to near single digits.

It explained that annual inflation declined each subsequent month until it reached 8.8 percent in November 2016, despite reaching a peak of 22.9 percent in February in the same year.

It further explained that lower inflation meant that prices of food in the fourth quarter of 2016 were increasing at a slower rate.