By James Gwati-As of September 1 2022, the Zambian Kwacha was the best in Africa and had overtaken the world’s best performing currencies.
Some of the best currencies overtaken by Kwacha included the Russian Ruble.
The Kwacha has been on a steady growth since 24 months ago, and observers attribute the trajectory to the ascendancy to power of President Hakainde Hichilema.
The government’s spokesperson, Joseph Kalimbwe, said this Thursday on Twitter:
The Zambian Kwacha has now overtaken the Russian Ruble to become the best-performing currency in the world, as of today September 1 2022. Our country still has a long way to go, but many thanks to everyone for voting for our party. The UPND is making steady progress!!!
How the Ruble rose:
Around May, the Russian Ruble was the best-performing currency despite wide-ranging sanctions imposed for its invasion of Ukraine.
i). The rise came when Russia insisted that European Union countries that purchase natural gas from Russia make payments in rubles, rather than in dollars or euros.
ii). The Central Bank of Russia on February 8 raised its interest rates to 20% in an emergency move. This means anyone who is looking to sell rubles for dollars now has an incentive to hold the Russian currency, which would in turn cushion the fall in the Ruble.
iii). The Russian government forced export-focused businesses to convert 80% of their foreign currency into rubles triggering significant demand for the Russian currency, thus also helping to prop it up.
Zambian Kwacha’s rise is attributed to:
a). Restored mining bullishness – In addition to political stability, the rise of the Kwacha is attributed to Mining which has long been a cornerstone of Zambia’s economy. The global copper market is tightening, so new mines are difficult to find. Consequently, the Zambian kwacha has been in high demand, as revenue from the country’s exports increased by 14.2 per cent to $5.9bn in 2021. According to the Bank of Zambia, copper contributed $4.4bn to the country’s total earnings that year.
b). Massive debt relief – Zambia’s dollar debt, including arrears and state-owned company liabilities, rose to $17.3 billion by the end of last year. On July 30, Zambia’s official creditors, led by China and France, agreed to negotiate a restructuring of their debts. Consequently, Zambia got final approval from the International Monetary Fund for a $1.4 billion bailout. Following this news, the Zambian kwacha advanced to its highest level.
c). Increased forex supply – Economist Patrick Chileshe says the other reason why the Kwacha has been gaining against the US dollar is increased forex supply. To guard against the volatility in the exchange rate, the central bank was offloading an average of $13 million per day in June. He said:
We have seen the Kwacha gain strength, and that was driven by increased foreign exchange supply to the market by the Bank of Zambia which was consistent in the market, whereas the demand for US dollars has been low, and that led to the appreciation of the Zambian Kwacha.
The Zambian kwacha is the best-performing currency in the world against the US dollar, rallying over 18.5% from January 22 to September 1.
While continental peers South Africa, Zimbabwe, Nigeria, Ghana, Malawi and Kenya have been unable to control rising inflation and plunging currencies, Hichilema’s government has managed to reduce the inflation rate from 24.4% in August 2021 to 9.7% in June this year.