Kwacha, plummeted to a historic low against the US dollar on Wednesday, reaching 27.30 to the dollar. This significant depreciation comes amidst a backdrop of hard currency shortages and a devastating drought that has triggered power cuts across the nation.
According to data from the London Stock Exchange Group (LSEG), the Kwacha has shed nearly 5% of its value against the greenback since the beginning of the year, and a staggering 17% in the past six months. The currency’s previous low was recorded at 27.23 on February 6.
The recent depreciation of the Kwacha is attributed in part to a severe drought that has ravaged crops in Zambia, compelling the country to increase its reliance on food imports. Additionally, critically low water levels in Zambia’s hydropower dams, responsible for generating 85% of the nation’s electricity, have led to plans for heightened electricity imports, further exacerbating pressure on the local currency. Moreover, heightened demand for dollars to facilitate the importation of petroleum products has intensified the strain on the Kwacha.
This downward trend in the value of the Kwacha is not a recent phenomenon. Over the past decade, the Zambian currency has experienced a depreciation of more than 300% against the US dollar, reflecting persistent economic challenges and vulnerabilities.
The latest depreciation of the Kwacha underscores the urgent need for policy interventions to address the underlying economic issues facing Zambia. As the country grapples with the consequences of the drought and currency depreciation, policymakers face the daunting task of implementing measures to stabilize the economy and restore investor confidence in the Kwacha.
Source: Diggers
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