Zambian Kwacha has recorded a modest depreciation against the United States dollar and other convertible currencies, bringing an end to its recent positive performance.
The local unit is currently trading at K20.10 and K20.46 on the bid and offer respectively, after several weeks of strong gains.
Economist Dr. Esther Banda, attributed the movement to short-term domestic and global factors rather than a deterioration in economic fundamentals.
Dr. Banda told Money News in an interview that the recent performance of the local currency reflects normal market behaviour after a period of sharp appreciation.
“One of the key factors is profit-taking and market correction. After several weeks of strong gains, some market participants locked in profits. This is a normal occurrence and does not signal renewed instability,” Dr. Banda noted.
She explained that seasonal demand for foreign exchange has also contributed to the slight weakening of the Kwacha.
Dr. Banda noted that increased demand for dollars to finance fuel imports, meet debt service obligations, and settle end-of-month corporate payments temporarily placed pressure on the exchange rate.
She further observed that renewed strength in the US dollar, driven by expectations that US interest rates will remain higher for a longer period, has weighed on many emerging and frontier market currencies, including the Zambian Kwacha.
“We had anticipated earlier that the US dollar may begin to perform more strongly into 2026, and this global trend has affected the Kwacha as well,” she said.
Dr. Banda added that short-term liquidity mismatches in the domestic foreign exchange market—particularly between export inflows and demand—can cause brief volatility even when underlying fundamentals remain supportive.
She reiterated that the recent movements reflect short-term market dynamics rather than a collapse of the positive momentum supported by fiscal consolidation efforts and improved macroeconomic management.
“So overall, the recent movements usually reflects at this particular point short-term market dynamics not a collapse of the positive momentum that has been supported by fiscal consolidation,” Dr. Banda stated.
Dr. Banda emphasized that sustained stability of the Kwacha will depend on structural reforms and policy consistency, rather than frequent short-term interventions.
She stressed the need for continued fiscal discipline, including tighter control of budget deficits and public debt, to reduce inflationary pressures and excessive demand for foreign exchange.
