By Nation Reporter
The continued stability, and recent appreciation of the Kwacha against the United States dollar to K21.39 as at 23rd July 2021 from K22.64 on 1st July, 2021, largely reflects changes in the supply of foreign exchange and broad improvements in market expectations, government has said.
According to a statement issued by the Ministry of Finance, these developments are consistent with the broad goals set out in the Economic Recovery Programme (ERP), which was launched by President of Edgar Chagwa Lungu in December 2020.
Recent developments in the foreign exchange market include improved foreign exchange flows from the mining sector in view of the strong recovery in copper prices and production.
This has led to a significant expansion in the trade balance estimated at US$1.9 billion during the period January to May 2021 compared to US$576.8 million over the same period in 2020;
Significant flows from non-resident investors seeking to purchase government securities, evidenced by the oversubscription at 116 percent in the bond issuance held today.
This, the ministry says, has bolstered liquidity in the foreign exchange market and has subsequently led to the substantial reduction in the hitherto excess demand.
Scaled up market support by the Bank of Zambia in view of improved flows from the mining sector has also contributed to the appreciation of the Kwacha against major world currencies.
Further, there has been a confidence boost in the market following the announcement by the IMF to allocate Special Drawing Rights (SDRs) to its members in August.
The ministry further says the SDR allocation is expected to increase international reserves by approximately US$1.3 billion in August.
In addition, the Bank of Zambia has continued with the gold purchase programme through which about US$22 million has been added to the international reserve position.
With the above developments and continued implementation of the measures in the ERP, the Kwacha is likely to remain resilient.
