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KWACHA BEGINS TO REBOUND – YAMBA

Secretary to the Treasury Fredson Yamba has said the Kwacha is on course to regaining its stability and resiliency. The Kwacha has posted a 1.3% gain week-on-week performance. Over the last few weeks, there have been pockets of pressure on the local currency due to the strong international performance of the dollar, and poor copper price outlook on world markets.

“With the presidential by-elections behind us, we hope to see the speculative tendencies of the private sector fizzle; and that’s positive for the currency market,” Mr. Yamba has said.

Over the past week, the exchange rate of the Kwacha against the US dollar has appreciated by 1.33 % due to increased supply of US dollars on the market. The Bank of Zambia has also continued to be watchful and to make interventions aimed at smoothing out the volatility in the forex market.

The Ministry of Finance is on high alert in monitoring global economic events as they affect Zambia as well. We have noted that on the global front, most commodity prices continued to be fragile as the global economy weakened.

Like other commodities, the price of copper has continued its relapse. The price of Copper on the London Metal Exchange has declined by 2.61 % to US$ 5,760.50 per MT (US cents 2.56 per pound) from US$5,915.00 (US cents 2.64 per pound) registered week-on-week. The continued decline in copper prices is largely attributed to the weak demand for the metal in the Chinese and European markets.

Crude oil prices remain below US$ 50 dollars per barrel, said Mr. Yamba, adding that this is mainly on account of global oversupply, compounded by the resistance of OPEC to calls to reduce supply.

Positive developments in China and the USA, when sustained, have the impact of raising demand for Zambian exports, particularly copper and copper related products. Latest information shows that Real GDP for the USA for the 4th Quarter was positive at 6% compared to 5% and 4.6% in the 3rd and 2nd Quarter of 2014, respectively. On account of a strengthening job market and lower fuel costs, consumer sentiment in the USA surged to an 11-Year High of 98.2 from 93.6 in December, 2014.

Meanwhile, China’s economic growth slowed down to its weakest in 24 years at 7.4 % in 2014 compared to 7.7 % in 2013. Investment in China’s property market slowed down to a five year low of 10.5 % in 2014 compared to 19.8 % in 2013. Further, China’s Central Bank has granted US$ 8.1 billion of relending quotas as support for businesses and the agricultural industry, and a government commission approved a plan to build urban rail networks. The building of urban networks project has kept the outlook on copper prices positive, as the project will enhance demand for copper products.