By Cecilia Chiluba/Zambia/Lusaka
The Zambian Kwacha is expected to face renewed pressure in the second quarter of 2026, driven by rising global oil prices and increased domestic demand for foreign currency ahead of general elections, economist Dr. Esther Banda has said.
Commercial Banks in Zambia have quoted the local currency at K19.05 and K19.45 per US dollar, on the bid and offer respectively.
Dr. Banda noted that escalating tensions in the Middle East have disrupted global supply chains, pushing oil prices up significantly and strengthening demand for the U.S. dollar.
“We have seen an increase in oil prices because of the war in the Middle East. About 20 percent of the world’s supply chain has been disrupted. As a result, we expect to see a huge demand for the U.S. dollar because the price of oil per barrel has increased by over 60 percent,” Dr. Banda said.
She explained that the surge in demand for the US dollar is likely to exert downward pressure on the Zambian Kwacha, leading to a possible depreciation in the short term.
Speaking in an exclusive interview, Dr. Banda further observed that the pre-election period could intensify the situation, as both government and political players increase spending on imported goods and services.
“This is the quarter where government and the opposition are preparing for general elections. We expect a lot of procurement for various goods and services that can only be sourced from outside the country, which will increase demand for foreign currency,” she noted.
She also warned that the ongoing oil crisis could disrupt manufacturing and service delivery due to potential shortages.
“As a result of this oil crisis, certain services and manufacturing activities may not take place because of shortages that might begin to occur. So overall, we expect the Kwacha to face some pressure and possibly depreciate slightly,” Dr. Banda added.
On policy recommendations, Dr. Banda emphasized the need for long-term strategies focused on stabilizing the currency for six months to a year, rather than short-term appreciation.
She called for the full implementation of the export tracking framework to ensure that export earnings are remitted through local banking systems.
“We need to ensure that exporters remit their earnings into Zambian bank accounts so that the balance of trade and balance of payments are aligned,” she said.
Dr. Banda noted that despite high copper prices in recent months, Zambia has not fully benefited due to gaps in capturing export revenues.
“We have seen copper prices going as high as US$13,000 per metric tonne. If such earnings were coming into the country, it would help the Kwacha to strengthen and stabilize,” she explained.
The economist also cautioned against proposals to exchange copper for aid, warning that such arrangements could undermine foreign exchange inflows.
She urged the government and the central bank to carefully manage both short-term monetary policies and long-term structural reforms to safeguard the Kwacha.
“At this point, it is important that strong management is put in place around the stability of the Kwacha, especially from the central bank’s point of view,” she said.
