THE fall of the value of any national currency always increases the cost of imported raw materials in that country thereby raising the cost of production.
This, in the end, leads to the high prices of goods and services locally.
It ultimately renders the local products and services uncompetitive against others on the international market.??For an import-oriented economy like Zambia’s, the effects of the free-falling Kwacha on the national economy are enormous.
Local individuals and organisations that have external commitments to pay are on the receiving end and suffer all the pangs of the plummeting Kwacha.
Equally, the Government itself, as an entity, is not insulated from the adverse effects of the local currency, as far as imports are concerned.
This is because the poor performance of the Kwacha entails that a local importer or spender – be it an individual or organisation – pays much more Kwacha for any given transaction pegged to the United States (US) dollar every time the value of the Kwacha goes down.
Over and above the planned expenditure, some more Kwacha has to be spent on meeting the transaction, making the exercise more costly.??We are, however, upbeat that with hard work and financial prudence by the Government coupled with the timely and appropriate interventions from the Bank of Zambia (BoZ), the situation could be arrested.
Yes the Kwacha can be rescued on its way down if all relevant stakeholders, including the BoZ work together, pulling in one direction.
We further agree with President Edgar Lungu that the BoZ and its governor are critical in this crusade.
As we join others in welcoming new BoZ Governor Denny Kalyalya, we have no doubt that the man is equal to the challenge, having previously worked as deputy BoZ governor.
Dr Kalyalya and the entire team at the BoZ should know that Zambians are expectant that they, together with the relevant wings of the Government, should save the Kwacha from further dismal performance.??We are aware, though, that in the main, the Kwacha depreciation is a multi-faceted phenomenon caused by various internal and external factors.
Major among the external causes is the growing strength of the universally-convertible currency, the US dollar.
Indeed since the 2008 global financial meltdown, the mighty dollar has risen at a faster and higher rate than other major currencies.
According to the Ministry of Finance since the end of 2013, the dear Kwacha has lost more than 24.3 per cent of its value against the dollar.
Ironically, the euro has depreciated by 20. 3 per cent, the South African rand by 11.7 per cent and the British pound by 7.9 per cent.
That has been worsened by the plummeting copper prices on the international market, considering that copper is the only meaningful export for the country.
While that does not provide any comfort, it is a mere allusion that Zambia is not alone in this scenario.
The local factor fueling the scenario is the ever low export of local goods and services compounded by the high imports.
To come out of this Kwacha dilemma, therefore, calls for the promotion of the export efforts so that Zambia can earn more foreign exchange, particularly the dollar to surpass the current demand through imports.
For as long as the demand for the dollar remains higher than what is being offloaded on the market, the Kwacha’s murky performance will surely continue.
While it may further be helpful to discourage imports in the short-term, in the long-term, that may not be doable –  given the globalisation of the market and the weak local manufacturing base in the country. |OPINION