Kwacha stability cheers World Bank

Mon, 12 Dec 2016 11:05:12 +0000

THE Kwacha has been stronger and less volatile compared to the previous year due to prudent measures put in place, the World Bank has observed.

This is according to the World Bank, Zambia Economic Brief for December, 2016 dubbed ‘‘Raising Revenue for Economic Recovery’’ that although the local currency had continued to fluctuate against its major trading currencies, it performed stronger and experienced less volatility in the first nine months of 2016 compared  to 2015.

The report stated that between January and end-November, 2016, the Kwacha had appreciated by 10.4 percent against the United States dollar, 13.2 percent against the Euro and 2.1 percent against the South African Rand.

The organisation attributed the favourable performance of the Kwacha to four factors and explained that one was the tight monetary policy measures introduced by the Bank of Zambia as well as the reduction on the demand for imported goods which gave a breather to the demand for foreign currency.

‘‘The Kwacha has continued to fluctuate against its major trading currencies but was stronger and less volatile in the first nine months of 2016 compared to 2015.

“Between January and end-November, 2016 the Kwacha had appreciated by 10.4 percent against the United States dollar, 13.2 percent against the Euro and 2.1 percent against the South African Rand,’’ the report reads.

According to the brief, the second factor was foreign currency inflows in the first half of 2016 which stood at U$ 397 million, 20.3 percent less than the level in the same duration in 2015.

Further, the tabulation stated that the return of foreign interest in Kwacha-dominated bonds at the August 2016 auction and lastly, the perception that the economy had weathered the toughest part of the shocks and that an International Monetary Fund (IMF) –supported economic recovery was most likely.

World Bank noted that the tight monetary policy had almost tamed inflation to near single digits after having reached a peak of 22.9 percent in February, 2016 but explained that annual inflation declined each subsequent month until it reached 8.8 percent in November, 2016.

The report said that although the BoZ monetary policy helped reduce exchange rate volatility and moderate inflation in the year, it was without cost owing to low liquidity which made it difficult to borrow at a time the growth of the economy slowed down as well as firms faced domestic challenges such as the power crisis.