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The continued positive performance of Zambia’s microeconomic fundamentals, coupled with a weakening United States (US) dollar, is driving the bullish performance of the local currency, economist Kelvin Chisanga has said.
In recent weeks, the Kwacha has appreciated from around K28 to trade within the K23 range against the US dollar.
Speaking in a telephone interview with Zambia Monitor, Chisanga said the foreign exchange market was benefiting from a favourable microeconomic environment underpinned by a combination of strong internal and external factors.
He explained that the Kwacha was also receiving a boost from seasonal tax inflows, which had strengthened the government’s fiscal position by improving liquidity, enabling more effective implementation of national development programmes.
“Zambia’s positive microeconomic trend is supporting the performance of the local currency. We are benefiting from favourable conditions, both domestically and externally.
“Seasonal tax inflows are significantly enhancing the government’s fiscal position, and the weakening of the dollar has created supportive conditions for emerging market currencies, including the Kwacha,” Chisanga said.
He noted that the strong 2024/2025 agriculture season was complementing economic growth by increasing local incomes, reducing dependence on imported foodstuffs, and boosting export earnings — all of which were helping to stabilise and strengthen the Kwacha.
Chisanga also attributed the currency’s resilience to the Bank of Zambia’s proactive monetary policy stance, which, he said, was not only managing inflation expectations but also helping to stabilise the broader financial system.
“We’re seeing the Bank of Zambia maintaining a firm and strategic policy stance. This is positively affecting inflationary pressures and anchoring market confidence in the local currency,” he said.
Looking ahead, Chisanga said June 2025 presents a unique convergence of factors, including mid-year seasonal tax obligations and routine monthly financial commitments, which are expected to drive further local demand for the Kwacha and ease pressure on dollar demand in the domestic market.
He added that the rising demand for the Kwacha in trade and everyday transactions signals growing confidence in both the local currency and the wider economy.
“At the same time, subdued import demand, driven by increased local production and greater use of domestic substitutes, continues to relieve pressure on foreign reserves and stabilise the foreign exchange market,” Chisanga said.
On the recent reduction in fuel prices, he observed that the development was contributing positively to the broader economy by lowering transport and production costs, thereby providing relief to businesses and consumers alike.
“All these factors — from the strong agriculture season to improved fiscal liquidity, stable monetary policy, and reduced import demand — are collectively pointing towards a resilient and balanced economic trajectory for Zambia.
“The sustained focus on structural reforms, enhanced domestic revenue mobilisation, value addition, and consistent policy implementation will be key to maintaining this positive momentum,” Chisanga added.
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