The opposition Patriots for Economic Progress Party (PeP) states that issuing a Statutory Instrument compelling mining companies to remit the gross proceeds of mineral sales back to Zambia is the most effective and sustainable approach to support the Kwacha exchange rate.
PeP President Sean Tembo has cited the current situation where only a small fraction of forex proceeds from mineral sales is remitted back to Zambia. He attributes this to the imbalance between the reported balance of payments surplus and the actual shortage of forex in the market.
Expressing surprise, Mr. Tembo has questioned the Bank of Zambia’s strategy of repeatedly increasing the Statutory Reserve Ratio (SRR) and the Monetary Policy Rate (MPR) in an attempt to curb the Kwacha depreciation, despite evidence suggesting that these interventions are neither effective nor desirable.
Mr. Tembo notes that the Statutory Reserve Ratio has seen successive increases from 9% at the beginning of the year to 11.5% in February, 14.5% in August, and 17% in November. However, the Kwacha has not demonstrated any positive response to these substantial adjustments in SRR.
Similarly, the Monetary Policy Rate, currently standing at 11%, has been increased by more than 400 basis points throughout 2023, yet the desired impact on the Kwacha has not materialised, according to Mr. Tembo.
