Zambia’s currency (kwacha) has become the world’s best-performing currency since Hakainde Hichilema was announced the winner of the August 12 presidential poll.
The value of the kwacha rose by 7.8% this week to 17.92 against the U.S. dollar, the best performance out of more than 140 currencies tracked by Bloomberg. It’s rally wiped out the past year’s losses as both offshore and onshore investors sold dollars into the market, and some importers held off buying them in anticipation of further kwacha strength, according to a note from First National Bank Zambia, a unit of Johannesburg-based FirstRand Bank Ltd.
Almost five million Zambians came out to vote in the elections, and overwhelmingly rejected incumbent Edgar Lungu as president. President-elect Hichilema, on his sixth attempt, swept to victory by over a million votes, and secured a formidable majority in the National Assembly.
Lungu’s tenure was sour at best as his copper rich country became the first in Africa to default external debt during the pandemic. The presence of a new man in the top seat often sends positive shockwaves in the market, and Hichilema’s business acumen, which endeared him to weary voters, has poured more fuel into this fire.
The International Monetary Fund (IMF) declined offering an economic stimulus program to the administration of outgoing President Edgar Lungu citing inability to pay back and high corruption rates.
With a new man in office, the Washington-based lender is set to proceed with the economic program and grant a $1.3 billion loan by the end of April.
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“There is obvious hope amongst investors that there will a swift change in economic policy with the new administration in charge,” said David Willacy, a foreign-exchange trader at StoneX Group Inc. in London.
“In such a small foreign-exchange market, an influx of dollars from reinvigorated offshore investors goes a long way in a short time, particularly when dollar buyers such as importers remove themselves from the market.”