Africa-Press – Zambia. KWACHA ON THE RISE: INFLUX OF DOLLARS, POLICY MOVES, AND GLOBAL FACTORS FUEL GAINS
Zambia’s currency, the kwacha, has strengthened notably against the US dollar in recent days, trading at ZMW 24.00 per dollar on Thursday compared to ZMW 24.99 just a week earlier. This unexpected rally has sparked debate among economists and financial analysts about what is truly driving the currency’s performance.
According to a statement released by Zambia National Commercial Bank (ZANACO), the kwacha is expected to remain bullish in the short term due to a sharp increase in dollar supply. The rise in supply has been attributed to seasonal factors such as tax inflows, improved agricultural exports, and payments from mining companies traditionally strong contributors around mid-year.
However, some analysts argue that the strength of the kwacha is less about improved productivity and more about deliberate moves by the Bank of Zambia (BOZ) to restrict dollar access and control liquidity. These moves have included increasing the Statutory Reserve Ratio (SRR), withdrawing deposits, and conducting sterilization operations to absorb excess kwacha from the market.
“The central bank has been withholding oxygen from the economy to stabilize the kwacha,” one financial commentator said. “We are not seeing this rally because of booming exports or increased investor confidence but because the tap on dollar access has been tightly controlled.”
On the other hand, economists like Dr. Lubinda Haabazoka believe there’s more to the story. He notes that the kwacha typically performs well this time of year due to increased inflows from the agriculture sector and mining taxes. “We also have to factor in global trends. The US dollar is weakening worldwide, especially in commodity-driven economies,” Haabazoka explained.
Indeed, Zambia is benefitting from a combination of internal and external factors. The global softening of the US dollar, driven partly by political uncertainty in the United States, has improved the standing of many commodity-based currencies. Zambia’s copper exports and solid maize harvest have contributed positively to the national revenue stream.
Still, the sustainability of this appreciation remains in question. If BOZ’s liquidity tightening is the primary force behind the kwacha’s gain, what will happen when the central bank relaxes its grip? Many fear that without real economic growth and increased investor confidence, the currency could quickly slip back into depreciation.
Further concerns surround the unregulated mineral sector. Observers point out that illegal mining and smuggling of high-value minerals like gold and sugilite continue to drain potential revenue. “How much are we losing to illegal mineral exports each year, and how much could that add to national revenue if formalized?” one analyst asked.
As Zambia navigates these economic crosswinds, it is clear that while the current kwacha gains are encouraging, they may be fragile. Real stability will depend on whether the government can strike a balance between tight monetary control and long-term structural growth.
June 22, 2025
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