THE LOCAL currency weakened to a fresh low against the dollar this week, depreciating to 8.04 from 7.95 at last week’s close.
Amid mass protests over soaring inflation and its weakening currency, the country, late last week, reversed its decision to refrain from requesting international financial aid.
Government is seeking as much as US$2 billion from the IMF to shore up its finances and regain access to global capital markets.
At the same time, the government is considering offering fuel coupons to transportation companies to reduce the impact of fuel price inflation on food costs.
According to AZA Finance, Africa’s largest non-bank currency broker by trading volume at over US$1 billion annually, despite the potential for an IMF deal, it expects the local currency to depreciate further given the economic challenges the country faces.
AZA Finance continues that in Nigeria, the naira dipped to a fresh low against the dollar this week, trading at 616 from 615 at last week’s close. The South African rand slumped to its weakest level against the dollar since the start of the pandemic, trading at 16.55 from 16.45 at last week’s close amid global risk-off sentiment and domestic power shortages.
Relief for Africa
Punit Jani, Head of Trading & Risk Innovation, AZA Finance, commenting on relief initiatives taking shape to ease food and debt in the face of the global economic situation, stated “As the supply-chain disruption caused by Russia’s war in Ukraine continues, international relief packages for Africa are starting to take shape. USAID, this week, pledged a US$30 million package to support Zambian food exports to East African countries to help ease the impact of soaring food prices.” Meanwhile, Paris-based think tank Finance for Development Lab, has launched the African Liquidity and Stability Mechanism to help shield African countries from the impact of volatile commodity prices and provide debt relief.
The mechanism will be funded by African countries, donors and proceeds from rich countries rerouting their allocations of the IMF’s special drawing rights to African countries, in alignment with the Liquidity and Sustainability Facility initiative from the United Nations Economic Commission for Africa.
Such assistance, combined with plans from Turkey, the US and others to release trapped grain from Ukraine, signal some gradual relief for Africa’s struggling economies.