What Is the ZMK (Zambian Kwacha)?

The Zambian kwacha (ZMK) is the legal tender and national currency of the Republic of Zambia, issued by the central bank, the Bank of Zambia. The Zambian kwacha derives its name from the word for "dawn" in the Nyanja language.

It subdivides into 100 ngwee.

Understanding the ZMK (Zambian Kwacha)

The Zambian kwacha (ZMK) is legal tender in Zambia, the majority producer of copper on the continent of Africa. Due to its copper production, the country’s economy and the value of its currency have historically experienced volatility based upon shifts in the copper commodity in the global market.

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 also in 1964. The Zambian pound circulated alongside the previously used British currency. 

The Currency Act of 1967 formally established the Zambian kwacha (ZMK) which replaced the Zambian pound at an exchange rate of 1 kwacha to 0.5 pounds, the equivalent of 1.4 U.S. dollars. Zambian pounds continued to circulate alongside the kwacha until 1974.

Zambian Kwacha Pegging and the Economy

The central bank linked the kwacha’s value to both the British pound (GBP) and the U.S. dollar (USD) until 1971. The devaluation of the USD, in what had become known as Nixon Shock, also took the U.S. off of the gold standard, effectively ending the post-WW II Bretton Woods agreement. Revaluation of the USD caused the revaluation of the kwacha against the pound. Zambia subsequently dropped its pegging 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 Bank of Zambia to introduce a 4.5 percent crawling peg 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. The ZMK exchange rate bottomed at 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.

According to 2018 data from the World Bank, Zambia is a lower-middle income nation which experiences a 2.9% annual growth rate in population. The country continues to struggle with inflation. The yearly gross domestic product (GDP) growth rate is 3.8% with an inflation deflator of 9.3 percent.