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LUSAKA. — Zambia’s kwacha has hit a series of record lows since the start of the year as a severe drought keeps the pressure firmly on the copper-producing Southern African country’s economy.
Analysts had hoped Zambia’s emergence from default early last year would have helped sentiment, but the currency is now roughly 3 percent below where it was before its debt restructuring deal and has fallen nearly 15 percent over the last six months.
It was trading at 27,95 per dollar on Wednesday, just above the latest record low of 28,05 on Tuesday.
“Zambia is in a state of severe drought, and this appears to manifest in currency weakness as the hydroelectrically dependent country faces an industrial slowdown,” Access Bank Zambia said in a research note.
“Mining companies are being forced to reduce copper production, a key foreign revenue earner,” it added.
The severe effects of El Niño caused the worst dry spell in southern Africa in a century last year, devastating crop production and forcing Zambia’s authorities to cut electricity generation on the Kariba dam, the biggest source of electricity.
The kwacha plunged when Zambia defaulted on US$11 billion worth of external debt in November 2020, but saw a brief 20 percent jump last February when it became clear its restructuring efforts were going to be successful.
One financial analyst in Lusaka said some companies had sold dollars during Wednesday’s session in preparation for local tax payments next week, offering some support to the kwacha. — Reuters.
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