The Zambian Government has recently announced that it would impose exchange controls, a governmental restriction on the amount of foreign or local currency that can be traded, to counter the ZMW devaluation against the USD.
The announcement was done by Zambian President Edgar Lungu’s spokesman, Mr. Amos Chanda, in an interview with Zambian National Broadcasting Corporation (ZNBC) where he explained that the Zambian President cannot allow the national currency collapse on expectations that the issue will fix itself.
President Lungu would intervene through the Zambian Treasury to allow the Central Bank to regulate the currency if this does not behave properly, he added.
Mr. Chanda indicated that the government will release USD 120 million into the market in the coming days and further USD 140 million within the next two weeks, aiming at raising the liquidity of the USD.
With these measures the government expects to halt the ZMW slump which has depreciated 60.9% year to year reaching the ZMW 9.89951 per USD in September, 2015 according to data compiled by Bloomberg.
The slump on the local currency is product of the recent droughts that have yielded to a power crisis in the country and the slump on the international copper price which has fallen almost 24% in the same period, hurting the 60% of Zambia’s total exports represented by the commodity according to Trading Economics.
On March 21st, 2014 the Zambian Government decided to apply exchange controls for the first time, when it announced a ban on payments of goods and services by businesses in USD and a mandate to repatriate foreign currency earned from exports, according to the Financial Times.