THE Bank of Zambia (BoZ) says it remains alert on the Kwacha performance as it continues to monitor the sharp recovery process from a shocking slump that hit a record high of over K7 against the dollar recently.
The BoZ said it would continue to address the key structural constraints in the financial sector and make the inter-bank foreign exchange market more efficient.
BoZ Governor, Michael Gondwe was confident of achieving the set objective of a flexible and market-determined exchange rate that reflected market fundamentals and promoted macroeconomic stability.
The Kwacha was now trading at around K6.4 against the dollar and it was expected that with financial interventions introduced by the Central bank, the local currency would continue to show signs of recovery.
“We are confident that efforts to develop our financial markets and make the interbank foreign exchange market more efficient, coupled with the continued strong growth in non-traditional exports, will promote a diversified supply of foreign exchange and help achieve greater resilience in the foreign exchange market,” Dr Gondwe said.
Dr Gondwe said in a statement issued in Lusaka yesterday that as a result of additional measures implemented on May 30, this year, the exchange rate had shown signs of stability over the past week.
Giving an update on developments in the foreign exchange market and measures taken to stabilize the Kwacha, Dr Gondwe assured that Zambia’s economic fundamentals remained sound and that the rate at which the Kwacha depreciated was not consistent with economicrudiments.
Dr Gondwe said the targeted 6.5 per cent end-year inflation remained on course despite indicators showing it was pegged at 7.8 per cent last month with contributing factors causing the rise, being the depreciation in the exchange rate.
This, he based on higher food prices during the period between October, last year and March this year, prior to the crop harvest and the increase in fuel prices and the more recent announcement of electricity price hikes, which would exert inflationary pressures.
“Having said this, we are confident that the increased investment in the electricity sector supported by economic tariff rates will bring the benefit of higher exports and more stable power supply, which ultimately will support export diversification, exchange rate stability, greater productivity in industry and lower inflation,” Dr Gondwe said