It goes without saying that though Razia Khan is correct that supply of foreign exchange is somewhat below its levels from some players (but not GRZ given the Eurobond), a more astute reading suggests the challenge are to do with sentiment. It is not an issue of demand and supply per se. It is simply about sentiment and clearly the fundamentals appear to be weakening given PF's general direction. As we have repeatedly noted, we have to see the Kwacha first within its general trajectory over the last three years, and then since September 2013 following the widening fiscal deficit position and subsequent credit downgrade, tapering of US credit and associated policy mistakes. The key is restoring confidence. Sadly, that may become challenging if the gathering suggestions that we may be on the precipice of a major political risk are to be believed :
Zambian Kwacha falls to record low for world's worst drop in May, Matthew Hill, Bloomberg, News report:Zambia’s kwacha retreated to a record low against the dollar, depreciating more than any other currency in the world this month, as lower copper prices and a tax dispute with mines curbed foreign-exchange supply.
The currency of Africa’s second-largest producer of the metal, used for electrical wire and water pipes, weakened as much as 2.3 percent, the biggest slide in two months, to 7.035 per dollar. The kwacha was trading at 6.9610 as of 2:03 p.m. in Lusaka, the capital. That extended losses in May to 9.4 percent.