LUSAKA, Feb. 22 (Xinhua) -- Analysts on Friday expressed concern on Zambia's declining international foreign reserves and asked the government to come up with measures to prop up the reserves.
The country's central bank said the international reserves have dipped from 1.63 billion U.S. dollars to 1.57 billion dollars as at the end of September 2018, or one month and 24 days of import cover, the lowest level in 10 years.
The Economics Association of Zambia (EAZ), an association representing economists, said the declining international reserves increases the country's vulnerabilities to stress shocks.
In a release, the association said if not properly managed, the declining international reserves could lead to a potential liquidity crunch which could impact the domestic liquidity market.
"With debt service payments dominated in foreign currency, the association foresees high open market operations activity to manage availability of the local currency," the release said.
Lubinda Haabazoka, the association's president, said the development was sad as it created uncertainty in the international market.
He said the government needed to quickly find new measures to prop up the reserves, adding mining firms which account for about 70 percent of foreign exchange earnings need to do more to help the government tackle the problem.
According to him, banks should also provide incentives that will force businesses and individuals hoarding the U.S. dollar to take it to the banks.
Chibamba Kanyama, a local economist, said the status of foreign reserves has the capacity to trigger uncertainty among Zambia's creditors and other players in the economy.
He noted that the international reserves may have dipped partly due to the debt servicing and urged the government to consider reducing on acquisition of more debts.
According to him, failure to arrest any further growth in debt may put pressure on foreign reserves and that this may trigger economic instability.
