Saturday, July 14, 2012
The reasons behind all of this are many but boil down to a few - the new PF government made it illegal to deal in dollars in order to A) get the old MMD government to offload their (stolen and hidden) dollars and B) strengthen the kwacha. Now buying or selling in dollars can get you 10 years in jail so the market is now flooded with people trying to trade-in dollars for kwacha creating (hopefully) a brief time where the demand for kwacha is spiking and the dollar is weak. The government is also working on a new currency by dropping the three zeros off the kwacha to make it 4.6 kwacha to the dollar instead of 4600 to the dollar (also a bid to get people hoarding cash to get rid of it - which might help flood the market and make the dollar strong again...).
Long story short - the government is creating a false demand for kwacha to strengthen the local currency and weed out crooks. Hopefully the market will set this all straight again in a month or two and the exchange rate will stabilize. Hopefully in way that won't mean that our personal and ministry budgets are suddenly 25% short every month.