Kwacha adjustment dependent on national budget – analysts

FIRST National Bank (FNB) projects the Kwacha performance to be influenced by the just announced 2017 national budget.
FNB says the local unit, which was projected to remain subdued with undivided attention to the proceedings at Parliament, will in the coming sessions ride on the pronouncements.
On Friday, Minister of Finance Felix Mutati unveiled a K64.5 billion national budget, which is aimed at achieving the objectives of the economic recovery programme to ensure sustained and inclusive growth.
In its market update,FNB also says on Friday morning the market was eagerly waiting for the budget presentation, which should set the tone of the direction of the Kwacha.
The bank says the market was also keen to see how monetary policy efforts thus far employed will be complemented from the fiscal side.
“After a turbulent year, the market will be eager to see how the government intends to put the economy back on track and how it intends to stimulate much-needed growth. The takeaway from the presentation will set the tone for the FX [foreign exchange] market,” the bank says.
The bank also anticipates interest rates to move in response to a number of factors including the inflation outlook, expected budget deficit and liquidity conditions.
“In the short term, we expect rates to remain elevated but to eventually taper off as various anticipated fiscal measures begin to bear fruit,” the bank says.
Meanwhile, Zanaco says the Kwacha was on Friday expected to trade range-bound with factors of demand and supply being the main drivers of the currency pair’s next move.
It was expected to trade in a range of K9.75 and K9.85.
Similarly, United Bank of Africa (UBA) says the local currency market, which opened Friday’s session trading at K9.80 and K9.85 at par with Thursday’s close, was expected to maintain its pressure on the dollar.
UBA says in its treasury newsletter that the Kwacha was projected to trade within K9.87 and K9.97 on the bid and offer respectively ahead of the tax obligations this week.

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