What is 'ZMK (Zambian Kwacha)'

The Zambian kwacha is the currency used in Zambia. It is subdivided into 100 ngwee and issued by the Bank of Zambia. Foreign exchange markets abbreviate the currency as ZMK.

BREAKING DOWN 'ZMK (Zambian Kwacha)'

The Zambian kwacha derives its name from the word for "dawn" in the Nyanja language. Zambia accounts for the majority of Africa’s production of copper. Because of this, the country’s economy and the value of its currency have historically experienced volatility based upon shifts in the global copper market.

History of the ZMK

In 1964, the British colony of Northern Rhodesia declared its independence and changed its name to the Republic of Zambia. The Bank of Zambia issued a Zambian version of the pound in 1964, which circulated alongside the British currency used previously. The Currency Act of 1967 formally established the kwacha as the pound’s replacement at an official rate of 1 kwacha to 0.5 Zambian pounds, the equivalent of 1.4 U.S. dollars. Zambian pounds continued to circulate alongside the kwacha until 1974.

The central bank linked the kwacha’s value to both the British pound and the U.S. dollar until 1971, when devaluation of the dollar caused a revaluation of the kwacha against the pound. Zambia subsequently dropped its peg to the British pound and reset its U.S. dollar peg to a rate of 1.4 U.S. dollars per kwacha. Further devaluation of the U.S. dollar in February 1973 led the central bank to introduce a 4.5 percent crawling band for the kwacha against the dollar.

A period of economic distress caused by a combination of low global copper prices and increases in fuel costs triggered high inflation in Zambia during the 1980s. The Bank of Zambia responded by issuing higher denominations of currency, introducing 100- and 500-kwacha banknotes.

The advent of multiparty politics led to some economic liberalization in the early 1990s, though inflation remained high. In 1996, the Bank of Zambia was forced to introduce notes at denominations of 1,000, 5,000 and 10,000 kwacha as the currency depreciated significantly, bottoming out around 4,800 kwacha per U.S. dollar in 2006. A period of economic growth followed, bringing relative stability to the kwacha’s value.

In 2013, the central bank redenominated its currency using a denominator of 1,000. Stable values against the U.S. dollar continued through 2014. A slowdown in the Chinese economy and reduced demand for copper caused a 42 percent fall against the dollar in 2015. Since that time, the currency has rebounded into a relatively stable range between 9 and 10.5 kwacha per U.S. dollar.

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