By GRACE CHAILE LESOETSA
CONTRARY to Government pronouncements, the Kwacha is expected to grow weak and not stronger in 2022, Economist Yusuf Dodia has said.
Mr Dodia said the recent increase in fuel prices as well as the expected 13 percent increase in electricity tariffs in the first quarter of the year, will have a direct impact on weakening the Kwacha.
Speaking in an interview, Mr Dodia said 2021 ended with microeconomic indicators not having significantly changed with banking interest rates at about 30 to 35 percent.
He said although the Kwacha did gain after the August 12 elections, the introduction of increased fuel prices is expected to weaken it.
“The Kwacha is determined by positive economic development. This means the economy becoming bigger and more efficient. So any increase in fuel or energy prices has a direct impact on weakening the Kwacha. So really, electricity tariffs going up is part of the mechanism which makes the Kwacha weaker rather than stronger. We are likely to see the Kwacha become weaker as we go forward,” he said.
Mr Dodia said the private sector should also brace for an increase in the cost of doing business unless there is an intervention of some kind by Government.
“We are likely to see the economy beginning to move from an economy where we were adding value, converting primary products into secondary processed product. We expect that this will now begin to reverse and start to see factories close down. In the alternative they will import products and sell them and become trading companies from manufacturing companies. This is because the cost of doing business could become so expensive and uncompetitive such that it’s cheaper to import products and sell products in Zambia than to manufacture locally. And this is the direction we are heading to as we enter 2022,” he said.
He said there is need for Government to relook at the challenges of increased cost of doing business.
