| The rapid recent appreciation of the Kwacha has placed these gains at risk. The sudden strengthening of the Kwacha since November 2005 has reduced the Kwacha value of agricultural exports by 30%, forcing reductions in farmgate prices and eroding exporter profit margins. As in a classic case of Dutch Disease, large inflows of foreign exchange–whether from surging international copper prices, foreign aid or speculative financial inflows–have contributed to the strengthening Kwacha. The subsequent rapid appreciation of the Kwacha risks making much of Zambia’s export agriculture uncompetitive on world markets. |
