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Saturday, 17 May 2008

An even stronger Kwacha? 2nd Edition

This Bloomberg article appears to settle the question of whether government plans to intervene in an event of a predicted strengthening of the Kwacha. Excerpt:

Zambian Finance Minister Ng'andu Magande said the kwacha, which has gained 13 percent against the dollar in the past six months, will continue to strengthen as copper production increases and metal prices gain.

Exporters should learn to adapt to the stronger currency as the government has no plans to ``interfere in the market'' to curb the kwacha's advance, Magande said in an interview in Maputo, Mozambique today during the annual meeting of the
African Development Bank.

Zambia, Africa's biggest copper producer, will probably mine 700,000 metric tons of the metal this year, a 40 percent increase from last year, Magande said. Export revenue has also been boosted by the copper price, which gained 19 percent in the past six months and reaching a record $8,880 a ton in London on April 17.

``I have warned Zambians that the currency will continue to appreciate,'' Magande said. ``In 2010, we're going to produce 1 million tons of copper and with the price around $6,000, then you're talking about $6 billion from just copper. By that time, we'll be producing nickel, uranium and other metals as well.''


  1. Oh my god.

    "Exporters should learn to adapt to the stronger currency"

    Anyway, it's unclear if he thinks the appreciation is a good thing or if he thinks intervening is worse.
    My bet is on number 1 but he seems to say number 2. Then again, he's not saying much.

  2. Neither...

    The official policy is one of simply reducing flactuations in the exchange rate...

    Zambia has no policy on the appropriate exchange rate that is consistent with poverty reduction, diversifying exports, etc.... It does not think that exchange rate policy should be used to achieve those goals...

    Or rather..they think "stability" is paramount to the actual level....

  3. The official policy is one of simply reducing flactuations in the exchange rate...

    But an appreciation is a fluctuation, isn't ?

  4. Not if it simply achieves a new higher equilibrium...

  5. Not if it simply achieves a new higher equilibrium...

    If the exchange rate was falling would they consider it achieving a new lower equilibrium or would they consider it an undesirable fluctuation ?


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