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Zambia's Kwacha emerges as Africa's best performing currency in 2024

Zambia's kwacha has emerged as the top-performing African currency against the U.S. dollar this year, boosted by the central bank's aggressive monetary policy tightening.

Zambia's Kwacha emerges as Africa's best performing currency in 2024
  • The kwacha has surged by 13.8% to 22.8 against the dollar in 2024.
  • Last November, the apex bank raised the statutory reserve ratio for deposits in both local and foreign currencies by 3 percentage points to 14.5%.
  • Analysts, however, stress that the kwacha's sustained strengthening depends on the country's ability to attract more foreign investment.
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The kwacha has surged by 13.8% to 22.8 against the dollar in 2024, as reported by LSEG data. The central bank took measures such as raising commercial banks' reserve ratios and increasing interest rates to counter the currency's decline, which had contributed to rising inflation, Reuters reported.

Last November, the apex bank raised the statutory reserve ratio for deposits in both local and foreign currencies by 3 percentage points to 14.5%.

Analysts, however, stress that the kwacha's sustained strengthening depends on the country's ability to attract more foreign investment.

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"The kwacha's performance this year has been remarkable," said Danny Greef, Co-Head of Africa at research firm ETM Analytics.

Zambian officials attribute the prolonged debt restructuring, now in its fourth year, to hindering foreign investment and contributing to the kwacha's weakening.

Despite government initiatives to boost the sector, copper production, a crucial source of foreign exchange for the southern African state, has also declined.

"The measures that we have taken... are meant to stem some of the demand, which we thought was excessive as we anticipate supply, which mainly comes from the mining sector," Bank of Zambia governor Denny Kalyalya told a public forum on Tuesday.

The kwacha has weakened slightly this week from 22.5 to $1 but is still more than 20% stronger than the record low of 27.23 reached on February 6.

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"What is expected is an adjustment that will stabilise around the 21-22 per dollar," economist Munyumba Mutwale said, adding that increased foreign currency flows were required for the kwacha to make further gains.

The government is now concluding arrangements for new investors to take over Mopani and Konkola Copper Mines, while other companies including KoBold Metals are undertaking exploration with commitments to fund new projects.

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