Zambia's kwacha plunged to a historic low against the US dollar on Wednesday, hitting 27.30, amid severe hard currency shortages exacerbated by a punishing drought that has triggered power cuts in the country, Reuters reported. According to LSEG data, the kwacha has witnessed an almost 5 per cent depreciation against the greenback this year, marking a 17 per cent decline over the past six months. Its previous low was recorded at 27.23 on February 6. While the US dollar index, tracking the US currency against a basket of currencies, has surged 4 per cent to 105.58 this year, the MSCI International Emerging Market Currency Index has only weakened by 1 per cent, highlighting the kwacha's underperformance against currencies of larger developing nations. As one of Africa's leading copper producers, Zambia faced a default in 2020 during the COVID-19 pandemic. Despite efforts for debt restructuring, progress has been hampered by delays, though a breakthrough occurred in March when the government and a group of bondholders reached a preliminary agreement. A trader at a commercial bank in Zambia remarked, "There is an overwhelming demand for dollars, primarily to cover imports of petroleum products, while the supply remains extremely scarce. It seems inevitable that we are edging closer to the 30-per-dollar mark." Currently, an International Monetary Fund (IMF) team is in Zambia, engaged in discussions regarding a third disbursement from a $1.3 billion rescue loan program sanctioned in 2022.
