Economist ties strong Kwacha to production

ZAMBIA needs to strengthen its production capabilities to boost the kwacha, which has this year posted depreciation against major convertible currencies, economist and financial market analyst Maambo Hamaundu says.
Mr Hamaundu said the strength of any currency lies in the underlying production of the economy and enhancing production capabilities of the economy will be key in ensuring stability in the currency.
“There is need to put resources in productive sectors as opposed to consumption. The agriculture sector, for instance, is one such area which presents a growth opportunity because agro processing industries can be developed,” he said.
Giving an overview of the performance of the local unit this year, Mr Hamaundu said the kwacha has been volatile over the past year and generally inclined towards depreciation.
Mr Hamaundu said the kwacha has depreciated by about 16 percent, having opened the year at about K5.52 against the dollar to about K6.4 recorded this month.
In the first quarter of the year, the kwacha opened trading on the retail market at about K5.52 depreciating to the level of about K5.8 in February
The kwacha depreciated further to around K6.35 in October and November.
He said Government needs to inspire confidence by ensuring that its actions and pronouncements do not scare investors.
Mr Haamaundu said there is also need for predictability in the economy as impulsive decisions affect investors’ plans.
“Broadly, the measures that can lead to having a stable rate of exchange is having an economy which is predictable. The pattern of demand and supply of foreign exchange should be fairly predictable and the emotional aspects of the economy should be properly handled by ensuring consistency in terms of policy pronouncement and guarded statements to avoid painting pictures of uncertainty,” he said.

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