What Is the Zambian Kwacha (ZMK)?
The Zambian kwacha (ZMK) is the official legal tender and national currency of the Republic of Zambia, issued by the country's central bank, the Bank of Zambia. The Zambian kwacha derives its name from the word for "dawn" in the Nyanja language, and is subdivided into 100 ngwee but steady inflation has made the ngwee (and lower denominations of kwacha) virtually worthless.
As of December 2020, 1 ZMK is equal to US $0.048. t
- The Zambian kwacha (ZMK) is the official currency of Zambia.
- The kwacha was introduced in 1967 when it replaced the Zambian pound, which was in use during its period as the British colony of Northern Rhodesia.
- Once pegged to both the U.S. dollar and British pound, the kwacha today floats freely against other world currencies, but inflation has seen its value erode steadily over time.
Understanding the Zambian Kwacha
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, 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.
The central bank initially linked the kwacha’s value to both the British pound (GBP) and the U.S. dollar (USD) until 1971. In what had become known as the "Nixon Shock" the U.S. took itself 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 5,000, 10,000, 20,000, and 50,000 kwacha as the currency depreciated significantly over time. The ZMK exchange rate bottomed at around 4,800 kwacha per U.S. dollar in 2006. A period of economic growth has followed, bringing relative stability to the kwacha’s value.
In 2013, the central bank re-denominated its currency using a divisor 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 10 and 20 kwacha per U.S. dollar.
The Zambian Economy
Zambia is a major 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.
Kenneth Kaunda became the first president of Zambia in 1964, and he remained in power until 1991. During this time, all Zambian banknotes featured a portrait of Kaunda. His image was later replaced by an African fish eagle after he left office.
A severe economic crisis stemming from poor government oversight and overspending contributed to high inflation throughout the 1990s and 2000s. According to 2019 data from the World Bank, Zambia is a lower-middle income nation which experiences a 2.9% annual growth rate in population. Today, the country continues to struggle with inflation. The yearly gross domestic product (GDP) growth rate is 2% with an inflation rate of 9.8 percent.