Zambia’s currency hit a record low against the U.S. dollar on Wednesday, touching 27.30 to the dollar amid hard currency shortages and a punishing drought that has led to power cuts in the southern African copper producer.
The kwacha has lost almost 5% of its value against the greenback this year and 17% in the last six months, according to LSEG data. Its previous low was 27.23 on February 6.
The U.S. dollar index , which tracks the greenback against a basket of currencies, has strengthened 4% to 105.58 this year. But the MSCI International Emerging Market Currency has weakened just 1%, showing the kwacha underperforming larger developing country currencies.
One of the largest copper producers on the African continent, Zambia defaulted in 2020 during the COVID-19 pandemic. Its debt restructuring efforts have been beset by delays, although they took a step forward in March when the government and a group of bondholders reached a deal-in-principle.
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“There is too much demand for dollars, mainly to meet imports of petroleum products and we have very scanty supply. It appears we are heading towards 30 per dollar,” a trader at commercial bank in Zambia said.
An International Monetary Fund (IMF) team is currently visiting Zambia, discussing a third payout from a $1.3 billion rescue loan programme approved in 2022.
REUTERS
