THE kwacha is expected to continue depreciating against major currency convertibles, given the heightened demand for dollars on the local market, exacerbated by government’s need to resume external debt service payments, market data shows.

According to financial market players, the kwacha is set to maintain a weak position, holding above the K20.00 per dollar mark, mainly induced by government’s need to resume external debt service payments on the Eurobonds, expected to resume on October 14, following a rejection by bondholders to suspend interest payments.

According to FNB, the kwacha is expected to continue losing value on account of heightened dollar demand, compounded by little supply of the greenback, as a result of government’s resumed external debt servicing, putting pressure on the local currency.

The local unit’s current trading position has worsened compared to an average K19.52 per dollar just one month ago.

“USD/ZMW has continued to hold firm at levels of K20.02. Volumes were relatively subdued due to limited US dollar supply. Zambia’s bondholders yesterday (Wednesday) indicated that they were unable to provide a positive response to a ‘Consent Solicitation’ request, which would have seen a six-month freeze on interest repayments. Given Zambia’s current fiscal position – debt to GDP ratio trending north of 100 per cent – this information may signal a negative sentiment from bondholders, which could put pressure on eurobond yields. From an FX (foreign exchange) point of view, if a consensus is not reached in good time, the government will have to meet coupon payments, which could put the local unit under pressure,” stated FNB in its daily market update.

“With a huge demand pipeline in place, we don’t see the currency strengthening in the short-term. We expect the local unit to hold at current levels at best.”

Some bureaus, such as Golden Coin, quoted the kwacha at K20.04 and K20.44 per dollar, while commercial banks, namely, Zanaco Plc, held the local unit at K20.01 and K20.40 per dollar for bid and offer, respectively, by close of business, Thursday.

On Wednesday, the Zambia External Bondholder Committee announced that its members were unable to provide a “positive response” to the Zambian government’s ‘Consent Solicitation’ request to suspend Eurobond interest debt repayments owing to a lack of debt transparency, among others.