Zambia’s Kwacha Extends Gains After Lungu Orders Mine Tax ReviewMatthew Hill
Zambia’s kwacha advanced for a second day after President Edgar Lungu directed the mines and finance ministers to review changes to the mineral royalty system that came into effect this year.
The currency of Africa’s second-biggest copper producer appreciated as much as 1.5 percent against the dollar, and traded 0.9 percent stronger at 7.5516 by 4:03 p.m. in the capital, Lusaka.
“A point of correction of the currency is upon us,” analysts at FNB Zambia, the local unit of South Africa’s FirstRand Ltd., said in an e-mailed note on Thursday. “We do not see any reasons why the kwacha should trade on the back foot.”
The kwacha has retreated 18 percent this year, reaching a record low on March 19, as metal prices fell and the new mine tax soured investor sentiment. To stem the slide, the Bank of Zambia raised statutory reserve ratios for lenders on March 20 to 18 percent from 14 percent.
Prices for copper, which the country relies on for more than 70 percent of its foreign exchange earnings, have climbed 11 percent since falling to a five-and-a-half year low on Jan. 26. Contracts for the metal rose 0.7 percent to $6,165.50 per metric ton in London on Thursday.