November 13th, 2009
Zambia is seriously considering buying gold from IMF by using its relatively high international reserves, according to International media.
The Bank of Zambia (BoZ) has been urged to consider using the high international reserves that Zambia has accumulated to buy gold as a way of diversifying from the United States dollar which is depreciating.
BoZ governor Caleb Fundanga said at a quarterly Press briefing on Tuesday that the rise in international reserves to more than $1,788 million as at the end of September was the highest the country has achieved in 38 years.
Analysts however said the reserves could count to nothing because of the rate at which the US currency was depreciating, and countries like India, Sri Lanka, China and Russia had realised that it was better to stock gold than the inflationary-troubled dollar.
High reserves mean nothing with a falling and inflation hit US dollar, they said.
India last week used its reserves to buy IMF gold and even Sri Lanka is shifting a good portion of their reserves into gold and are set to buy IMF gold, including Russia and China,” they added.
The international reserves in dollar terms could become valueless should the dollar continue to depreciate. Countries are moving to gold whose price is at record high levels as nations dump the dollar.
Stocking gold is a way of diversifying from the risk a US dollar meltdown so as to preserve value of the international reserves as gold.
Even Malawi and Congo have some gold reserves, Zambia have none. Even poor Sri Lanka is buying gold, they added.
Zambia accumulated the international reserves the gross international reserves increased to $1,788.9 million in September 2009 from $ 1, 171.17 in June 2009, after the country received more than US$600 million from the IMF under the special drawing rights.
As a result, international reserves are expected to rise to about five months of import cover by the end of 2009.
On the appreciation of Zambia’s currency, the Kwacha against major international currencies, there was need for BoZ to examine whether it was a case of local currency drying up as a result of its being used in neighbouring countries like Zimbabwe, Malawi, Tanzania and the Democratic Republic of Congo (DRC).
The Kwacha has appreciated by 7.7 per cent during the third quarter, which was the highest rate since the beginning of the year.