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Zambia urges businesses to respond to currency appreciation

Xinhua, April 11, 2016 Adjust font size:

The Zambian government on Monday called on the business community to respond quickly to the appreciation of the local currency by reducing prices of products and services.

The Zambian currency, the kwacha, posted improvements against major convertible currencies having appreciated more than 2 percent since Friday, according to financial analysts.

Deputy Minister of Finance Christopher Mvunga said it was good business practice and corporate governance for the business community to respond positively by reducing their prices in the same way they increased prices when the currency depreciated.

He said the business community has no option but to respond positively because one of the reasons they gave when increasing their prices was the depreciation of the local currency which had made importing of products expensive.

According to him, the appreciation of the local currency was a sign of good economic management by the current government, adding that the government's policy was to stabilize the exchange rate so that businesses could plan their investments properly, according to the Zambia National Broadcasting Corporation, the state broadcaster.

But some analysts have said that the appreciation of the currency will not have immediate effect on the business community.

Dr. Lubinda Haabazoka, a senior business lecturer at the Copperbelt University, said while the appreciation might provide some relief for importers, the currency trading levels were still prohibitive towards stimulating business and lowering the cost of goods and services.

According to him, the currency's improvement was not a sign of improved fiscal discipline on the part of the government, adding that the only policy indicator that could have triggered the appreciation was the rise in interest rates, which has forced people not to borrow.

He said the business environment, exacerbated by the current energy crisis, meant that the cost of doing business was still high in the country. Endit