The Movement for Democratic Change MDC has observed that the continued exchange rate changes between the Zambian Kwacha and other world currencies will influence the investment and productivity of the agriculture sector.
The MDC is an independent political party and an alliance partner of the incumbent UPND led government.
MDC Chairperson for Agriculture, Dr. Godfrey Bbalo has said because a large amount of farming inputs such as machinery and pesticides are imported the continued currency movements will affect commodity prices.
Dr. Bbalo said what should be noted is that an increase in the value of the Kwacha will decrease the cost of imported products while a decrease in its value will increase the cost of imported inputs.
He said exchange rate changes currently observed on the market impacts on the competitiveness of the agriculture industry as-well-as competitiveness of Zambian exports on the international market.
“Foreign investors’ confidence and expectations will also influence the exchange rate. When investors are confident in the political stability of the country, they are more likely to purchase Zambian assets and this may push the value of the Kwacha” Dr. Bbalo said.
Dr. Bbalo said it should be noted that changes in the exchange rate are relevant to the farming business.
And Dr. Bbalo said a decrease in the value of the Kwacha will make producers more competitive and increase on exports while an increase in the local currency will influence the agriculture industry by making Zambian products more expensive for importers unless Zambian producers accept a lower price for the products.
Meanwhile, Dr. Bbalo has advised that in order to manage the exchange rate risks for the farming sector, there is need to hedge transactions on the future options of the market by having negotiations using anticipated exchange rates in the future.
He said there is also need to have exchange rate forward options that are contrary to the bank reviews.
“Understanding the exchange rate and its basic application is important for the agriculture producers. The exchange rate impacts agricultural commodity prices and farmers’ margins because this affects on a daily basis the agriculture business whether on imports or exports” Dr. Bbalo said.