- ‘Feast or famine’ kwacha vulnerable on court bid: INTL FCStone
- Opposition leader seeks to halt presidential inauguration
A successful bid by Zambia’s main opposition to prevent Edgar Lungu being sworn in as president of the copper producer next week could deal a further blow to the country’s “feast or famine” currency, according to INTL FCStone Ltd.
Hakainde Hichilema, leader of the United Party for National Development, has asked the High Court to halt Lungu’s Sept. 13 inauguration and reverse a Constitutional Court ruling to dismiss his application for the election result to be nullified. The kwacha fell for a fifth day on Wednesday and was 2.1 percent weaker at 10.21 per dollar by 1:26 p.m. in Lusaka, the capital. That’s the longest period of losses in nearly two months, and the lowest level since Aug. 17.
“The Zambian foreign-exchange market has really been a case of feast or famine in recent months, with market players seemingly jumping on any move lower or higher,” David Willacy, a London-based currency trader at INTL FCStone, said in reply to e-mailed questions. “Any serious success for the opposition presidential candidate in his bid to challenge the election vote or inauguration poses a threat to the kwacha.”
Lungu narrowly won the Aug. 11 vote amid the slowest economic growth since 1998 and an inflation rate of almost 20 percent, as falling copper prices caused the southern African nation’s currency to plunge. Lungu has said he plans to negotiate a loan agreement with the International Monetary Fund and cut energy and farm subsidies that contributed to a budget shortfall of almost 10 percent in 2015.
The Constitutional Court on Sept. 5 dismissed Hichilema’s bid to have the poll declared void without holding a hearing, the judges ruling that a 14-day deadline for the case to be argued had passed.
The kwacha’s 5.8 percent depreciation since Sept. 1 is a reversal of the gains made at the end of August, when foreign investors sold dollars to buy local treasury bills and bonds at auctions, Willacy said. Dollar inflows from mines and other large companies for tax payments could support the kwacha over the next 10 days, he said. If Hichilema is successful in his latest court bid, a recovery could be threatened.
“For the moment, it doesn’t look like any success for the opposition candidate is priced into the market,” Willacy said.