Zambia’s currency has evolved significantly since the country gained independence in 1964. The Kwacha, introduced in 1968 to replace the Zambian pound, has been the national currency ever since. Over the years, the kwacha has undergone multiple changes, including the most recent changes in 2013.
All these changes have been a reflection of economic shifts, inflationary pressures, and policy reforms. You will notice that every time we adjusted our currency and introduced a higher note, we were facing high inflation. Some experts have hinted at the possibility of this being the case even now.
The latest development in Zambia’s monetary history is the introduction of a new family of banknotes and coins, set to be launched on March 31, 2025. As expected, there is response from everyone and that’s probably because money is the one language everyone can relate to. Let’s start by looking at where we’re coming from with this Kwacha.
Before independence, Zambia, then Northern Rhodesia, used the British pound as its official currency. However, as part of decolonization efforts, the country introduced the Zambian pound in 1964. This was soon replaced by the kwacha (ZMW) in 1968, pegged at an exchange rate of 2 kwacha per 1 British pound. Throughout the 1970s and 1980s, Zambia’s economy faced major challenges due to declining copper prices, leading to inflation and the subsequent devaluation of the kwacha.
In 1973, Zambia introduced a commemorative 50 Ngwee coin to celebrate the birth of the Second Republic, marking the transition to a One Party Participatory Democracy. The Bank of Zambia also altered the design of the 50n banknote in 1974 to avoid confusion with the new K5 notes. During this period, the Kwacha depreciated slightly against the US dollar, with the exchange rate at K1 equivalent to $1.28. By the late 1970s, the Kwacha had fallen further below $1.
By 1980, the currency structure remained similar, with the highest denomination being the K20, though there was a change in the design of all banknotes. The 50n paper note was withdrawn by 1980. The late 1980s and early 1990s saw Zambia’s economy decline, primarily due to low copper prices and rising fuel costs. To meet the increasing demand for cash, higher banknotes like the K50, K100, and K500 were introduced, with the K1 coin replacing the paper note and the K2 note being withdrawn.
In the early 1990s, Zambia adopted multiparty politics, leading to the Third Republic and economic liberalization. As part of the changes, currency features were updated, replacing the Head of State’s portrait with national symbols like the Fish Eagle. The K5 and K10 paper notes were replaced with coins, while smaller coins gradually disappeared, with the 25n coin introduced. Inflation remained high, and the public showed reluctance to use coins, prompting an increased demand for banknotes.
In the late 1990s and early 2000s, Zambia’s economy faced further challenges, with inflation driving a surge in demand for cash. In response, new banknotes like the K1,000, K5,000, and K10,000 were introduced. By 2003, the K20,000 and K50,000 denominations were added to the currency.
In 2012, Zambia underwent a currency rebasing exercise to address the effects of inflation. The rebased currency was designed by reducing the denominations by a factor of 1,000, resulting in the current banknotes and coins in circulation, with updated national symbols.
Today, as you may have noticed, the Bank of Zambia has announced the introduction of a new family of banknotes and coins. The redesigned currency will include six banknotes – K500, K200, K100, K50, K20, and K10 – and six coins – K5, K2, K1, 50N, 10N, and 5N. While the alpha code (ZMW), numeric code (967), and currency symbol (K) remain unchanged, the new series features advanced security enhancements and design elements celebrating Zambia’s cultural heritage, including its flora, fauna, and waterfalls.
To ensure a smooth transition, the government will issue a Statutory Instrument (SI) specifying the exchange period and designated points for exchanging old currency. Plus, as expected, a nationwide sensitization campaign will educate the public on the new currency’s security features and usage.
Now, while the introduction of new banknotes and coins is primarily aimed at enhancing security and usability, such a move has broader economic implications. The updated security features will help curb counterfeiting, boosting confidence in the kwacha. A more secure currency deters illegal activities and promotes stability within the financial system.
The introduction of higher denominations such as the K500 and K200 notes suggests an acknowledgment of inflationary pressures. This move will make large transactions more convenient, reducing the volume of banknotes needed for significant purchases. Historically, the introduction of higher-denomination notes has sometimes been associated with inflation. If not managed well, the presence of larger banknotes might drive price increases, as businesses adjust to the new monetary landscape.
At a time when the country is grappling with economic hardships, it is important to mention too that printing and distributing new banknotes and coins come at a financial cost. The BoZ must carefully manage these expenses to avoid undue fiscal strain.
Businesses and financial institutions will also need to upgrade cash-handling systems, which could temporarily disrupt operations. A well-executed transition can strengthen public trust in the currency.
What we can note from the current events is probably that the BoZ’s emphasis on digital financial services signals a broader push towards cashless transactions.
Well, from the look of things, this is a trend for Zambia in every decade.
By Dingindaba Jonah Buyoya
