Michael Wamwita Writes….
I know my suit is classic but let’s talk about the dollar.
“We ve all seen the trending story that the dollar will reduce in hours when the Reds win election ”
This sounds bizarre but it’s very very possible .here is why .
Firstly. Exchange rate is basically the price of another currency. Just like the price of tomatoe is k5 so is the price of the dollar at k22 .
Those of us who have been to soweto market . U will realise that the price of a box of tomatoe is purely determined by how many farmers have brought tomatoes. If only one farmer bring tomatoe today at soweto market the price per box can skyrocket to as high as k300 per box .but if 50 farmers brought tomatoe at soweto the next day the price can drastically fall to as low as k20 per box .interesting right? 🥰.
Economist call it ,the invisible hand of demand and supply. So spa manje since we now all know that dollar exchange rate is just the same as price . How then will the dollar rate or price of the dollar reduce when the Reds or another color win election. Simple,its crystal clear that people ,businesses,investors,IMF ,u and me have lost confidence in the kwacha due to lack of prudent management by those we entrusted to manage our resource.bcoz confidence thelizno ,most people have decided to change their kwacha into dollar .causing a shortage of the dollar in the soweto market of dollars (banks ,beaurals and BOZ ) .Same as only one farmer bringing tomatoe to the market.
So only a few people bring their dollar for sale .munvesasa?…okay manje when another color wins say the reds.its likely that animal spirits will reduce the dollar rate .By the way animal spirits in economics means “confidence “,not animal spirits ija yama ancestors and juju 😂 .so when ” confidence” is restored in the kwacha. We will have more people selling their dollars at the soweto market of dollars (banks ,beaurals and BOZ) this will trigger more selling due to fear that the dollar will loose value against the kwacha….the same way the price of tomatoe drops when many farmers come to soweto or chisokone markets …munvesasa .??? .a practical example when former bank governor Dr Danny kalyalya got fired ,this dwindled peoples confidence and the kwacha lost value within 24 hrs.
So is it possible for the dollar to reduce in a few hours ,a few days or few weeks .
Absolutely YES. All we need are animal spirits in the kwacha 😂.
Urs LSK based economist.