ECONOMIST Trevor Hambayi says the country cannot maintain stability of the exchange rate without a clear roadmap on dismantling debt.
And Hambayi says despite the local currency recording some gains in the recent past, the business community is hesitant to reduce prices of commodities because of fluctuations.
In an interview, Hambayi said stability would only be achieved once the country knew how much it would be paying on a monthly or annual basis towards debt dismantling.
“The stability of the exchange rate cannot remain stable until we are able to sort out our debt potion. Because this is a single factor that is pushing us around in terms of where the exchange is going to fall. It is determining the liquidity in terms of hard currency on the market. Until we know how much debt we are going to be paying on a monthly basis or annual basis and where those resources are going to come from, we have defined the revenue we are going to generate from the domestic resources and we have also limited the amount of debt contraction from the capital market locally, because right now government is borrowing K5.3 billion on a monthly basis from domestic market which is reducing the liquidity on the market, until those factors are sorted out to create stability in the exchange rate, it is what is going to determine that the market will actually react in having to reduce the prices,” Hambayi said.
“Until those prices are reduced, we will continue to have a high cost of living even though the inflation is reducing because of the absence of liquidity.”
And Hambayi said despite the local currency recording some gains in the recent past, the business community was hesitant to reduce prices of commodities.
“What you will see is that the exchange rate has actually appreciated in the last two to three weeks but the price of goods has not changed. And this is from a business perspective where the business sector is saying that they cannot change the price of goods until they get to a point where they are confident that the exchange rate is going to remain stable over a period time,” said Hambayi.
