Standard Bank of Southern Africa has said that an aggressive build-up of international reserves by Zambia would help mitigate exchange rate fluctuations and liquidity shocks.

The bank said in its Market Watch analysis on Zambia for August 2006 that the commodity cycle and fickleness of portfolio flows would continue to induce volatility in the economy unless sufficient international reserves were accumulated to smooth the shocks, reported Zambia Daily Mail on Friday.

Although the bank of Zambia was targeting a single digit rate of inflation by the end of 2006, the main risks to achieving this target were the weakening kwacha, high world oil prices and increased government consumption, said Standard Bank.

The bank said improvements in copper revenue had enabled mines to reinvest, especially in mines that were considered unenviable when the prices were low.

The monthly average copper price increased by 114 percent to 8, 002 U.S. dollars a ton in 12 months till July 2006. But the copper miners were cognizant of the fact that pries at these high levels were not sustainable and had planned for a lower copper price in the medium term, said the bank.

Source: Xinhua