Fun

Hyperinflation and Currency Collapse Fears After Zambian President Fires Central Bank Governor

News Feed - 2020-08-26 02:08:04

Hyperinflation and Currency Collapse Fears After Zambian President Fires Central Bank Governor


Zambian President Edgar Lungu fired the country’s central bank governor Denny Kalyalya last week sparking fears that government wants to end the institution’s independence. Kaylalya was immediately replaced by Christopher Mvunga who reportedly has close ties to the President.


The abrupt decision, which sent shockwaves across Zambian financial markets, saw the country’s currency, the Kwacha shedding 0.7% against the greenback to reach an all-time low of 19.20 kwachas to a single U.S. dollar. Since the start of the year, the Kwacha depreciated by more than 25%.


According to a report, the President’s decision came as Zambia, which is the world’s second-largest producer of copper, is expecting its economy to contract by 4.2% in 2020.Zambian President Edgar Lungu.


Although no official reason has been given for the sacking, many experts believe that President Lungu wants to fight the effects of the global pandemic Covid-19 economy with increased spending. The closure of the economy has curbed the country’s revenue inflows.


Undoing some of the negative effects emanating from the Covid-19 pandemic will boost the President’s chances in next year’s elections.


Before his termination, Kalyalya had “repeatedly urged the government to cut the fiscal deficit amid ballooning debt and falling foreign-exchange reserves.” Falling foreign exchange reserves, in turn, exert more pressure on the Kwacha currency.


The International Monetary Fund (IMF), which is weighing the country’s request for a financial bailout, issued a statement reacting to Kalyalya’s sacking. In its comments, the IMF reminded Zambia that “is it imperative that central banks’ operational independence and credibility is maintained, particularly at this critical time when economic stability is threatened by the Covid-19 pandemic.”


Meanwhile, in an unusual public rebuke of an African government by another, South Africa’s Finance Minister Tito Mboweni attacked the decision on Twitter.


“Presidents in Africa must stop this nonsense of waking up in the morning and fire a Central Bank Governor,” Mboweni said. “You cannot do that. This is not some fiefdoms of yours! Your personal property?! No!!” he further exclaimed.


Mboweni, the former governor of the South African Reserve Bank, has since been reprimanded for his comments by the South African President, Cyril Ramaphosa.




In the meantime, Zambian economic commentators offered varying views on Kalyalya’s sacking and what this possibly means for the economy. Still, many argue the decision is ill-timed and sends the wrong signals.


One of the commentators quoted in the report is Grieve Chelwa, an economics lecturer at the University of Cape Town’s Graduate School of Business. Chelwa suggests that “there’s been a struggle for control over the central bank,” which preceded the President’s decision.


He adds that the final move to fire Kalyalya “might be a response to the government’s failure to push through a constitutional amendment that would remove the responsibility of printing currency from the Bank of Zambia.”


Chelwa expressed fears that the appointment of “pliant” Mvunga as Kalyalya’s replacement, means Zambia might be following the path walked by Zimbabwe until its economy collapsed in 2008.


“Kalyalya’s removal could push Zambia toward the soaring inflation seen in Zimbabwe in the 2000s,” the report quotes Chelwa saying. Zimbabwe faced its worst hyperinflation in the period between 2005 and 2008 leading to the collapse of its currency in 2008.


Zambia’s current inflation of 16 percent is likely to get worse if the government gets its way and the central bank starts to inject more money into the economy. The resulting high inflation levels will push Zambians to search for alternatives that are immune to government-induced inflation such as bitcoin.


Already, Zambians are active traders of digital assets on popular peer-to-peer (P2P) trading platforms. According to data sourced from some of the leading P2P bitcoin trading platforms, Zambia is one country with active traders. However, weekly trade volumes attributed to the country are still thin, as they do not exceed $25,000.


However, if Mvunga purses inflationary monetary policies as many experts are predicting, traded volumes on P2P crypto trading platforms will soar as ordinary Zambians seek refuge in digital assets.


What do you think is going to happen to the Zambian economy after this decision? Share your thoughts in the comments section belowAave Protocol Outpaces Maker With $1.4B Locked, Defi Project Granted UK Electronic Money LicenseNEWS | 10 hours agoAnalysts Predict US Presidential Election Outcome Could Collapse Dollar, Boost Bitcoin and GoldNEWS | 17 hours agoTags in this storyBank of Zambia, Bitcoin, Central Bank, COVID-19, Edgar Lungu, high inflation, IMF, p2p, Tito Mboweni, Zambian Kwacha


Image Credits: Shutterstock, Pixabay, Wiki CommonsSpot-markets for Bitcoin, Bitcoin Cash, Ripple, Litecoin and more. Start your trading here.Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.Read disclaimerShow comments

News Feed

Meta Launches Metaverse Digital Clothing Store
Meta Launches Metaverse Digital Clothing Store Meta announced that it was launching a designer digital clothing store that will allow users to purchase pieces of clothing for their
XRP Risks Fall To $1.55 If This Support Level Fails – Analyst
Reason to trust Strict editorial policy that focuses on accuracy, relevance, and impartiality Created by industry experts and meticulously reviewed The highest standards in reporting and pu
Crypto hacking losses decline in Q1 2024 — Immunefi
Amaka Nwaokocha1 hour agoCrypto hacking losses decline in Q1 2024 — ImmunefiThe report identifies 46 hacking incidents and 15 cases of fraudulent activities.312 Total views14 Total sharesListen to article 0:00NewsOwn t
Law Enforcement in Russia’s Samara Region Investigates 8 Cases of Fraud Related to Finiko
Law Enforcement in Russia’s Samara Region Investigates 8 Cases of Fraud Related to Finiko The investigation into the Russia-based crypto pyramid Finiko is growing with law enforc
Every Large Bank Will Actively Consider Crypto in 1-3 Years, Says Former Citi CEO
Every Large Bank Will Actively Consider Crypto in 1-3 Years, Says Former Citi CEO A former CEO of Citigroup said that every major bank and securities firm will consider crypto trad
Altcoin Season Just Flashed A Golden Cross Amid Crypto Market Recovery
Reason to trust Strict editorial policy that focuses on accuracy, relevance, and impartiality Created by industry experts and meticulously reviewed The highest standards in reporting and pu
Bank of Russia Wants to Restrict Crypto Investments by Blocking Card Payments, Report Reveals
Bank of Russia Wants to Restrict Crypto Investments by Blocking Card Payments, Report Reveals The Central Bank of Russia is currently reviewing various ways to prevent Russians fro
A Step-by-Step Guide to Creating and Selling Non-Fungible Tokens Built With Bitcoin Cash
A Step-by-Step Guide to Creating and Selling Non-Fungible Tokens Built With Bitcoin Cash In the summer of 2019, our newsdesk published a step-by-step guide on ho
North Korean Lazarus hacker group using LinkedIn to target and steal assets: Report
Prashant Jha13 hours agoNorth Korean Lazarus hacker group using LinkedIn to target and steal assets: ReportLazarus group first surfaced in 2009, and since then, it has primarily targeted crypto firms, stealing billions o
Bitcoin post-halving price consolidation could last 2 months — Bitfinex
Gareth Jenkinson13 hours agoBitcoin post-halving price consolidation could last 2 months — BitfinexThe Bitcoin halving is widely expected to have a positive impact on the price of the preeminent cryptocurrency, but ana
Bitcoin, Ethereum Technical Analysis: ETH Lower, as Markets React to Missile Exploding in Poland
Bitcoin, Ethereum Technical Analysis: ETH Lower, as Markets React to Missile Exploding in Poland Ethereum moved into the red on Nov. 16, as markets became nervous, following a miss
Ether turns inflationary for the first time since Merge
Zoltan Vardai10 hours agoEther turns inflationary for the first time since MergeThis marks the first period of Ethereum becoming inflationary in the past year and a half since the Merge took place.7889 Total views35 Tota