Increased exports, investor confidence boost Zambian currency: bankers

The increased exports and investor confidence are major factors for strong kwacha, the Bankers Association of Zambia (BAZ) has said.

BAZ chairperson Sherry Thole was quoted by Zambia Daily Mail on Tuesday as saying that huge investments in government securities from offshore institutions between October and November last year resulted in the local currency hitting recent record highs of between 3,250 kwacha and 3,500 kwacha to one U.S. dollar compared with 4,800 kwacha against the dollar in February 2005.

"Copper prices have continued to go up on the international market and local production has increased overall. There is not much of burden on the government to settle the debt obligation following the attainment of the Highly Indebted Poor Countries ( HIPC) initiative completion point. All this has given support to the strengthening of kwacha," she said.

As Zambia is still an import-oriented country with exports twice as low as imports at times, in the short term the appreciation of kwacha would mean reduced cost of production as well as reduced prices for finished products, Thole said.

She said in the long run, if the country takes advantage of strong kwacha, then it is likely to move into enhanced production and exports.

Increased exports will mean more wealth for the nation and more jobs for the local people, she said, adding major negative impact of a strong currency is on the value of export earnings.

Zambia reached the HIPC completion point in April 2005 and its external debt has been reduced to about 500 million dollars from 4. 5 billion dollars at the end of 2005 and 7.1 billion dollars as at the end of 2004.

In 2005, Zambia's trade balance recorded a surplus of 59 million dollars with total export earnings increasing by 17.5 percent to 2.1 billion dollars from 1.81 billion dollars in 2004.

Source: Xinhua