I guess many people are wondering, why is the Zambian Kwacha depreciating against the US dollar?? This has led to a malevolent blame game, finger pointing policy makers & generally panic within the economy. The reality of the matter is that the PF government is not to blame FOR THIS SPECIFIC FREE FALL in the Kwacha, which easily broke the 6 ZMW per dollar barrier last week. Many currencies are not doing so great against the dollar at the moment for example, the South African rand was quoted at 10.7260 ZAR per dollar today. For most of you who follow financial news, just last year ZAR was quoted at around 8.0 ZAR per dollar. The current situation is simply an effect, of the US FEDERAL RESERVEs plans to taper Quantitative Easing(QE) gradually all through 2014. Simplified, QE is a monetary policy used by Central banks, the FED in this case, were it buys treasury bills and mortgage-backed securities & issues credit to the banks reserves to buy bonds. This has an objective of lowering interest rates & encouraging economic growth. Finally, QE policy increased money supply in the US, because banks could lend more, thereby keeping the value of the dollar low. On December 18, the Fed decided to taper its QE policy by $10 billion per month, to $75 billion. This had an effect our currency declining, prompting BOZ to increase monetary policy rate by 0.50 percentage points & increasing the statutory reserve ratio from 8 per cent to 14 per cent, to decelerate the free fall and stabilise the currency....and please feel free see how other emerging economies are doing on this link truth-out.org/news/item/21777-tapering-of-quantitative-easing-is-throwing-emerging-markets-into-chaos-and-big-banks-are-getting-richer
Posted on: Tue, 11 Mar 2014 13:46:58 +0000
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