Lutangu Ingombe writes: Views on the Depreciating Kwacha Allow me to add to the debate on the highly volatile and depreciating Kwacha. A lot of people have come to explain the causes of depreciating exchange rate in Zambia without offering concrete solutions to the problem. We know that the long -run upward trend in the exchange rate is caused by shifts in macroeconomic fundamentals. In the short run mostly, it’s the mismatch in the demand and supply of Forex caused by speculative bubbles. This means the short run solutions and the long run solutions will be different. Short Run Solutions I strongly feel that in the short run the optimal solution to the fluctuations is actually to do nothing at all. Otherwise if we directly interfere in the market, we will lose our hard earned Reserves. In short the depreciation should not be a passport for BOZ to intervene in the market. Long Run Solutions Causes: Everyone knows that since 1992, all Zambian leaders (in MMD and PF) have worshiped on the shrines of Foreign Direct Investment -FDI Almost all FDI that comes to Zambia involves 100% ownership by foreign shareholders (Airtel, KCM, Vendetta, Zambian Breweries, MTM, Mopani Amanita just to name a few). Once they have paid their obligations in terms of wages, salaries and suppliers, the firm can do whatever it wants from profits including sending it out to their shareholders without limits. The demand for dollar especially for externalization purposes has been increasing since 1995 because the foreign stake in most firms has been fast increasing leading to a sustained increase in the demand for dollars. This will continue for as long as our leaders keep seeing FDI as their Lord and Saviour Solution: Let as slowly increase the stake of Zambian Citizens in these firms and other firms to come. Let Zambians, who will have to incentive to externalize the profits, start owning telecommunications, international gateways, construction and engineering firms, mining, manufacturing and transportation. The maximum a foreign national should hold in any firm in Zambia should be say 51%. Lutangu Ingombe Lusaka, Zambia
Posted on: Thu, 05 Jun 2014 09:58:49 +0000
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