Kwacha can be maintained by widening export base!
THE challenges that we are seeing being faced in the Kwacha’s performances, can easily be moderated by engaging and having a stronger and action-oriented export-driven policy.
Zambia should aspire to formulate an export-led facility growth policy to help on the balance of trade especially targeting commodities outside copper.
If we are to drive a sound diversification in policies, we should strongly centre our focus on promoting non-traditional exports especially if we firmly put all our arsenals strongly on agricultural products with value addition scope as a key objective plan of export expansion. WEe can then with this case, increase drastically the export base to facilitate a conducive macroeconomic conditions befitting on the basic requirements of our country.
This is in a bid to rescue our domestic currency from falling to unwarranted controls, especially when there is an imbalance factor being experienced with the trade performances between the export and import sectors.
The proposed policy formula can ultimately stimulate an increase in the domestic production sectors by widening local manufacturing activities with the aim to improve on the export market.
This will create an economic multiplier effect which will eventually push through some good employment numbers and can actually also increase values on the gross domestic product (GDP) though that cannot be taken as an immediate cause but with time it will look a positive undertaking.
The main idea behind IMF pushing most developing economies to embrace their prescription is that, countries should aim to maintain a relatively stable or low exchange rate which helps such target (countries) to build up on foreign reserves. This can equally serve as a cushioning agent against such any futuristic financial shocks.
The Kwacha’s current challenges are mainly due to trade differences that usually kept in existence between the import and export. At the moment and from time in memorial the country has been importing more trade volumes in terms of numbers of goods compared to the volumes of export moving out of our borders to regional markets.
This scenario, is the case which has promoted the inflation rate to always shoot up slightly, a figure away from our target range, which has always been a case of concern that keeps flushing away from the policy corridor set in prospective to achieve with Bank of Zambi. And for a very long time this has remained as a usual matter of failure but can also be worse, especially if left unchecked by stakeholders.
In economic practice, a country may revalue and revisit a number of its trade policies by trying to achieve positive economic conditions and aim to lower on the inflation rate with monetary policies which the central bank has been trying since the first quarter of 2017.
However, we can improve the economy by restoring balance of payment equilibrium especially through an increase in the value of our exports, import reduction by using the local industrialisation policy to make certain controls, and impose a moderate custom duty for undesirable goods and services through our revenue offices which may be a bit difficult to implement with a poor political will, looking at a slow-pace of economic activities being experienced in the country.
Unfortunately, we are importing mostly finished products despite having scarce foreign exchange available in the market.
This means that the imbalance between imports and exports keeps sinking the power of the Kwacha, thereby subjecting it to some sort of “pressure” all because available foreign exchange is always perceived less than what is required to make on our numerous consumable and essential imports.
The export base for the country is usually perceived so narrow such that it can’t stand equivalent to the demands which are always taken up with the import sides.
So in a nutshell, technically speaking, the rise in demand for foreign exchange will always exceed its supply factors, and this by nature following the law of demand and supply.