ECONOMIST Trevor Simumba has advised the UPND government to ensure that the exchange rate is held at K14 or K15 to a dollar for at least two years, warning of serious repercussions should it be allowed to appreciate any further.
And Simumba has called for the immediate removal and replacement of Bank of Zambia Governor Christopher Mvunga saying his continued stay at the Central Bank is putting the country’s economy at great risk.
In a statement shared in his Facebook page, Saturday, Simumba explained that the continued unbridled appreciation of the kwacha could lead to the economy catching the “Dutch Disease”.
“What we need for business is a stable Kwacha. Bank of Zambia, you need to find a balance and not just sit there and allow kwacha to appreciate. 14 to 15 kwacha to a dollar is a good balance for importers and exporters and let it stay there for at least 2 years or more. The big risk of the continued unbridled appreciation of the kwacha is that our economy catches ‘Dutch Disease’ which is an increase in the value derived from the mining in the economy, leading to a rise in the valuation of the currency, causing a deterioration in manufacturing, by making the manufactured goods less competitive in the export marketplace compared to those manufactured by economies with lower valuation currencies, because they are relatively more expensive,” he said.
“More importantly, the mines will bring in more imported inputs for their operations as these will be cheaper to import directly rather than buy from local suppliers. So we need to all calm down and stop this euphoria over the kwacha.”
He further warned the new government against making mistakes that were made in the last copper boom and ensure the economy is diversified.
“A lot of Zambian SMEs (small and medium enterprises) have lost money in the last few weeks as a result of the rapid appreciation of the kwacha which initially was artificially induced and now has run away due to the increased confidence in the new Government. But this now needs to be managed properly and HH and Dr. Situmbeko Musokotwane know this very well. Let us not make the mistakes we made in the last copper boom. This time let us harness the copper boom and diversify our economy. To do this we need a stable balanced monetary policy as it relates to exchange rates, inflation and interest rates,” he noted.
And Simumba stated that keeping Mvunga at BoZ was putting the economy at risk.
“The President needs to appoint a new BOZ Governor and Board as soon as possible. Keeping Mvunga any longer is putting the economy at great risk. What Zambian business needs is a stable consistent exchange rate and a predictable conducive level playing field that enables business to plan and execute their activities. The BOZ Governor and his team have committed acts that border on economic sabotage and should not be given any more time to cause more damage to the economy,” stated Simumba.