The Bureau de Change Association of Zambia has disclosed that players in the market are worried and unconfident about the current market sentiment thereby withholding dollars from the market.

The Zambian kwacha has continued to depreciate against the United States US$ dollar, a situation that has heavily contributed to the country’s economic instability.

The Zambian kwacha has depreciated by about 30 percent from about K18 in January 2023 to over K23 as of mid-November 2023.

Speaking in an exclusive interview with the Zambian Business Times –ZBT, the association president Paul Kalumba said this is because the market sentiment is not positive as compared to the beginning of the year thereby causing doubt among the different players who are hesitant to inject their forex into the local economy.

Kalumba explained that there are players in the market who import and export and that if these players have a positive feeling that the economy is moving in a positive direction, they release dollars to the market but that has not been the case. He also noted that if they feel the market is moving in a negative direction, they withhold the dollars. He said by withholding the dollar scarcity is created in the market causing the rate to go up.

“The person who is demanding the dollars has to pay more because it is now scarce on the market, meanwhile the person who has the dollars, because of lack of confidence in the market holds the dollars, and as the rate keeps going, will continue to hold them hoping to get more kwacha for the same dollar” said Kalumba.

He noted that for a country’s exchange rate to improve there must be production and export adding that the more items are exported, the more forex is earned and that the more forex is available on the market, the more the kwacha gains.  

Kalumba noted that Zambia’s biggest export is copper and that the country has this year recorded the lowest production of copper in fourteen (14) years. He said this entails that the amount of forex coming into the country is very low with high demand.

He further added that during the final quarter, demand also goes up because other industries usually ask for forex as there are non-productive sectors such as the ordering of fireworks for the festive season, and that despite such being non-productive; forex is needed to be able to order them. “So the demand is huge because people are preparing for the festival season thereby increasing the demand on the already scarce currency.”

He said the real solution is to quickly get Mopani and Konkola Copper Mines – KCM operational for it to be producing, exporting, and earning forex.

Kalumba mentioned that there was a lot of good feeling about the UPND government and reaching debt restructuring adding that people thought money would start flowing when these come into play which has not been the case.

He noted that MoUs are still being signed, and negotiations are still ongoing. He said servicing debt puts strain on the country, and that as long as the debt relief is not secured, the country is in trouble.

Kalumba however said he is positive that Zambia will soon get the relief. “It has taken time, but the time we have lost is not in vain. I am positive that it will become steady not in the too distant future.” He added that if the mines get back to operation it will bring positivity as it will increase the country’s production.