The expectations of the MPC with respect to the exchange rate have begun to materialise. Having come under immense pressure in 2020, owing to the weakening macro-economic environment, which was significantly exacerbated by the COVID 19 pandemic, the Kwacha has broadly stabilised in 2021. As at July 23, 2021, the year-to-date rate of depreciation of the Kwacha against the US dollar slowed down significantly to about 5.0 percent compared with almost 30.0 percent over the corresponding period in 2020. More recently, the Kwacha was trading at K21.39 on July 23, 2021 compared to K22.64 on July 1, 2021, representing an appreciation of 5.5 percent.

Required:

A.Discuss the factors that have caused the appreciation of the Kwacha using appropriate references.