By XAVIER MANCHISHI –
REDUCING unnecessary imports is the ultimate solution to arresting the free fall of the Kwacha, Bank of Zambia deputy Governor Bwalya Ngandu has said.
. Ngandu
Dr Ngandu said in an interview that the country was currently importing way too many things, some unnecessarily, thereby increasing demand for foreign currency which was affecting the bullishness of the Kwacha.
“What we need to understand as a country is that the strength of the Kwacha depends, by and large, on our capacity to earn foreign exchange as against our capacity to demand for foreign exchange. It’s the supply-demand factor that is the ultimate thing,” he said.
There was need for the country to start producing and exporting more local goods so as to lessen on unnecessary foreign imports.
Dr Ngandu said the best way to improve on producing local goods for export was by improving the quality of what is produced so that the goods are competitive and acceptable on the international market.
The Bank of Zambia deputy Governor, however, admitted that the increase of exports above importation of consumption goods stood as a medium and long-term measure but that it was something worth focusing on.
He explained that the current volatility of the Kwacha was partly as a result of the fall of copper prices on the international market as well as the strength the dollar has gained over the last two months over other major currencies.
“The dollar, as a currency has become strong. Most of the major currencies in the world have performed badly against the US dollar in the last two months and we are not an exception to that,” Dr Ngandu said.
As a remedial measure, the Government had engaged the mining sector into dialogue over the new tax regime given that copper was Zambia’s major export.
Previously, the Central Bank also reduced the amount of liquidity in the banking system to limit the amount of money going into the foreign exchange market which has seen the rate of decline of the local currency slowing down.
Lately, the Kwacha has been hovering in and around K7.5 against the US dollar.
