ECONOMIST Chibamba Kanyama says uncertainties surrounding the IMF deal are contributing to the unstable performance of the Kwacha at the moment.
In an interview, Friday, Kanyama said the exchange rate was not as stable as people thought it would be because investors were still anxious about the direction of the economy and the debt restructuring process.
“The exchange rate is not as stable as we thought it should be because people are still anxious about the direction of the economy. They are still anxious about the debt restructuring process, anxious about the overall transition and they want to see that take place. We are still not very certain about the restructuring of the external debt. Most of the investors are on the wait-and-see. You know, the initial fear was that China was not going to get on board. They were worried that China will not come on board, China will not join the credit committee that is looking at the restructuring negotiations of the debt. But there are indications that China is kind of coming on board but the investors have not seen that news yet, they want to be sure of the concrete steps,” he said.
Kanyama said investors were not yet sure whether the IMF deal would actually be clinched.
“So every day they are watching the statements of the Minister of Finance and they are also watching the way forward with the IMF. So there is a road map that has kind of been taken but the investors are not yet sure whether this deal will finally be clinched. So until that moment when they are sure that creditors agree to the restructuring, we will see this Kwacha movement be the way it is right now. What we are seeing is a combination of a lot of things. I’m very sure it will be successful but investors don’t deal like that, investors want to deal with actual numbers, actual commitments for them to contribute resources,” he said.
Kanyama said once the IMF deal was finalised, only then will the Kwacha appreciate significantly.
“You will see that maybe by June when we have finalized the IMF deal, you will see now the Kwacha sliding towards appreciation. Of course you can see that despite the Monetary Policy Rate being raised to nine percent, the Kwacha is still depreciating and so it tells you that there is a bigger forcer there and the big force, in this case, is still uncertainty over the deal that shall be concluded in my opinion by June this year and we will finally get the IMF deal,” said Kanyama.