Floppy US dollar supply distorting Kwacha's stability!
THE scant US dollar supply taking place on the local market is pushing gradually some heavyweights on the Kwacha's out right performance.
The Kwacha has been depreciating with some marginal values for some time now in a row.
Despite, these current trends, the local currency is still likely to remain under some relative pressure in the coming weeks due to the sustained demand, as observed by the mar ket factors, where we have a scarcity outflow of supply for the global currency reserve especially on the local scene, and we have seen that very little supportive efforts being made by the Bank of Zambia to cushion the pressure.
This is also weakened by a portion of small contribution emanating from the low participations within the external development sector.
These are mostly South Africans and Chinese who have been main players in trade and commerce, a situation that looks to be diminishing with low chances of helping back to resuscitate the current business environment, as it just drip ping off the narrowed supply funnels for the world's green commodity.
However, the local currency might pick up to trade in the range bound with high chances of maintaining a buoyant position, only if the supply shows some responsive signs of improvements.
This is more especially with the likelihood of any local bond auction, and if that's the case, then we should see a good number of participations from the foreign players who must be vested with some keen interest in this particular fi nancial instrument.
Going forward, as a going concern, Zambia should try by all means to put up a special mechanism which is supposed to be a sustainable formula more less like a "serving pot" to keep afloat local currency's performance rather than always making interventions through reserves or balance of pay ments account.
This is perhaps one of the many reasons as to why we may need sinking fund account to factor in the national budget to help salvo with foreign exchange pressures, should the economic shocks direct market fundamentals right in the opposite parallel directions.