An Economist has attributed the recent appreciation of the Kwacha to an improved supply of foreign exchange on the financial market.
The Kwacha has started the week on a slightly stronger note, with the US dollar now buying at K22.51 and selling at K22.85, compared to last week’s average of K22.58 and K23 respectively.
Speaking in an interview with Money News, Gerald Soko explained that the Bank of Zambia’s upcoming bond auction has attracted offshore investor interest, prompting some market players to convert their US dollars into Kwacha to participate in the auction.
Mr. Soko further noted that the appreciation of the local currency against major convertibles is also linked to the central bank’s intention to limit the use of foreign currency in domestic transactions — a measure expected to be rolled out within this quarter.
“The appreciation of the Kwacha that we saw yesterday and part of last week was due to improved supply of FX on the market. We have a bond auction this week and one of the things we have seen is offshore interest into the bond auction that is taking place on Thursday. So offshore players are converting their FX balances to participate in the auction on Friday.”
“The other issue I want to speak to is the fact that there has been conversations recently about the Bank of Zambia issuing currency directives that will look at limiting the use of foreign currency in local transactions, and so they did final consultations I think about a week ago or two and they do plan to roll those out into the market within this particular quarter before the end of 2025,” Mr. Soko said.
He added that the combination of offshore inflows and market expectations regarding the central bank’s currency directives has contributed to the Kwacha’s strengthening.
“Therefore, a combination of the expectation that the the Bank of Z is going to roll out currency directives but also offshore flows that speak to to the bond auction that we have this Thursday being the key drivers of the appreciation of the Kwacha that we have seen this week so far,” he noted.
