February 17, 2015 / 2:08 PM / 5 years ago

UPDATE 1-Zambia kwacha dips over tax row, triggers central bank meeting

(Adds cbank meets as kwacha extends losses, background)

LUSAKA, Feb 17 (Reuters) - Zambia’s kwacha fell nearly 4 percent on Tuesday to an 8-month low as investors fretted about unresolved tax issues in the mining sector and weak copper prices, triggering a meeting by central bank officials.

The kwacha fell to 6.9500 against the dollar in its biggest intra-day fall since 2011. This was the softest it has been since early June 2014 according to Thomson Reuters data.

Bank of Zambia deputy Governor Bwalya Ng’andu told Reuters the central bank was meeting over the sharp fall in the unit.

Market nervousness worsened the currency’s fall, traders said.

“The kwacha is mainly under this pressure because of market jitters after it crossed the 6.8000 per dollar psychological barrier,” a trader at a commercial bank said.

“The unresolved tax issues with mining companies have also constrained dollar supply.”

Africa’s second largest copper producer increased open pit mining royalties to 20 percent from 6 percent and underground royalties to 8 percent from 6 percent starting January, a move the chamber of mines said could cost 12,000 jobs.

Newly-elected President Edgar Lungu this month sought to ease the impasse with mining companies over the tax and royalty rows, directing his cabinet to end the dispute. ID:nL6N0VD3LS]

The kwacha’s depreciation was also in line with broad-based dollar strength on global markets, amid concerns over the worsening global economic environment and low copper prices, First National Bank said in a market note. (Reporting by Chris Mfula; Writing by Stella Mapenzauswa; Editing by James Macharia)

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