Zambian President Michael Sata will within the next few days sign a law requiring exporters in Africa’s biggest copper producer to deposit foreign-currency earnings in local banks, Deputy Finance Minister Miles Sampa said.
The Bank of Zambia amendment act will allow the kwacha, which is currently at an “abnormal level,” to strengthen to below 5 per dollar, he said in an interview in Lusaka, the capital, today. The currency has weakened 3.9 percent this year and traded 0.5 percent lower at 5.4 per dollar by 1:30 p.m., according to data compiled by Bloomberg.
In a country where 61 percent of the population live below the poverty line, according to the World Bank, Zambia faces an inflationary spiral if the kwacha continues to weaken, Finance Minister Alexander Chikwanda said on Feb. 5. The slumping currency also makes it harder for the southern African nation to repay international debt, he said.
There is no time requirement that exporters will have to keep foreign-currency earnings deposits in Zambian banks under the amended law, Bwalya Ng’andu, deputy governor of the Bank of Zambia, told reporters.
“We are not introducing exchange controls,” he said. “These measures are well-meaning, we are just trying to increase our capacity to manage things a little more effectively.”
Zambia’s copper exports have been increasing faster than imports, meaning the kwacha should strengthen or remain stable, Sampa said. The government has accused mining companies of falsely declaring their exports and robbing the country of foreign currency that can support the kwacha.
“The financing doesn’t come, it stays abroad in accounts in Switzerland, in accounts in Hong Kong, in accounts in England,” Sampa said.
Sampa told central bank Governor Michael Gondwe the currency is “heavily depreciated” at a meeting earlier today. “The levels do not depict fundamentals on the ground.”
Chikwanda accused banks of operating as a “cartel” and profiting from manipulating the kwacha on Feb. 26. The Bankers Association of Zambia said demand for the kwacha and its pricing were subject to market factors beyond the control of its members.