The Zambian currency, the Kwacha has continued to slide and lose value against major international convertible currencies amid continued negative sentiment.
By close of business on Thursday 20 September, the local unit was trading at a 27-month low of ZMW11.5 per USD.
The Kwacha has been on a weakening streak since sentiment turned negative following the breakdown talks of an expected USD1.3million IMF extended credit facility deal leading to debt sustainability concerns.
However, what is most disturbing is the loud silence coming from the country’s central bank, a semi-autonomous institution charged with the responsibility for Zambian financial markets stability.
Efforts by the Zambian Business Times – ZBT to get a comment on action the central bank – BOZ is taking to arrest what some analysts are taming as a free fall proved futile as the phones went unanswered.
When ZBT finally managed to get the BOZ head of Communications on phone, he requested for an emailed press query, preferring not to speak on record.
There is urgent need for a crisis meeting with relevant actions agreed on what actions the nation should take to stem the rout.
Some of the questions that need urgent answers from the central bank include:
(i) What immediate and short term measures BOZ will take to influence the direction and prevent further free fall of the Kwacha
(ii) Will the central bank adopt a do nothing strategy and rely on market forces?
(ii) Why is there delayed action from BOZ? who else should step in to stem the currency rout?
(iv) From the similar experience last time, the more time is lost in inaction, the more difficult it will be to correct the situation.
(v) Zambia is a net importer and its consumer goods are directly related to the USD/ZMW pair, are we on the horizon of another spiraled inflationary period?
There are so many questions to ask and there is need for the central bank who are the best placed to counter a currency rout to utilize its tool kit to influence the financial market positively.
Delayed action and adopting a “do nothing strategy” by BOZ will prove to be too costly for mostly the local and ordinary Zambians who relay solely on Kwacha earnings and savings. The need for urgent action from BOZ can not be over-emphasized. This rout on the Zambian Kwacha unfortunately can not be wished away, its needs experienced hands to take charge as the majority of Zambia’s wealth is at stake, risked being wiped out.