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Movement for Democratic Change (MDC), an independent political party and alliance partner of the ruling UPND government, has raised concerns about the impact of fluctuating exchange rates on Zambia’s agriculture sector.
Chairperson for Agriculture within the MDC, Godfrey Bbalo, highlighted the vulnerability of the agriculture industry to currency movements, particularly in relation to the Zambian Kwacha’s exchange rates with other global currencies.
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Bbalo mentioned in a statement in Lusaka on Tuesday that since significant portions of agricultural inputs, such as machinery and pesticides, are imported, any changes in currency would directly impact the prices of commodities.
He emphasized that an increase in the kwacha’s value would lower the cost of imported products, while a decrease would raise the cost of inputs.
These changes, he noted, affect the competitiveness of the agriculture industry and Zambian exports on the international market.
Furthermore, Bbalo pointed out the connection between foreign investors’ confidence, political stability, and the exchange rate.
He explained that when investors are confident in the country’s political stability, they are more likely to invest in Zambian assets, potentially boosting the kwacha’s value.
Addressing the need for risk management in the farming sector, he recommended hedging transactions on future market options and negotiating using anticipated exchange rates.
He also emphasized the importance of exchange rate forward options, contrasting them with bank reviews.
“Understanding the exchange rate and its basic application is important for agriculture producers. It impacts commodity prices and farmers’ margins, affecting the daily operations of the agriculture business, whether in imports or exports.” Bbalo stated.
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