By Ernest Chanda
THE Bank of Zambia (BOZ) has attributed the recent local currency appreciation to various factors, including improved copper price on the international market.
Copper is currently selling above US$9,000 a tonne, the highest so far in recent years.
The Central Bank explained that the improved copper price has also resulted in more foreign currency inflow.
‘’The strong recovery in copper prices to the current level of US$9,521 per metric tonne from a low of US$4,745 in March 2020 has contributed to sustained strong export earnings. This has resulted in improved foreign exchange flows from the mining sector through tax receipts remitted directly to the Bank of Zambia in US dollars,’’ read the statement signed by communications director Besnart Mwanza. ‘’In view of this, the Bank of Zambia has been able to provide more foreign exchange liquidity back into the market to reduce excess demand experienced since mid-2020. As at July 23, 2021, the Bank of Zambia sold US$687.5 million to the market compared to US$86.0 million over the same period in 2020. In addition, foreign exchange inflows from non-resident investors purchasing Government securities have significantly increased, further providing liquidity to the foreign exchange market.’’
The Bank further said the foreign exchange inflows had contributed to substantial reduction in outstanding demand to below US $5.0 million currently from an estimated peak of US $418 million in May this year.
And BOZ said it has been able to build international reserves due to the improvement,
‘’Besides supporting the market, the Bank has been able to build up international reserves, which stood at US$1.4 billion at the end of May 2021 compared to US$1.2 billion at end-March 2021,’’ said Mwanza. ‘’The Bank of Zambia has also continued with the local gold purchase programme, accumulating about US$22.0 million in monetary gold as at July 23, 2021. The improvement in the reserve position increases the country’s ability to respond to unexpected external events and the ability to address volatility in the exchange rate.’