By Esther Chilala and Mbewe Kalikeka
As February 11, 2025, drew to a close, news swept across social media regarding the Bank of Zambia’s (BoZ) plans to introduce new currency notes. This announcement sparked widespread speculation, with many questioning the true motives behind the decision.
Uncertainty and unanswered questions have fueled debates over whether the move is purely operational or signals broader economic implications. Some believe that this move may be an attempt to curb inflation and address the rising cost of living, while others suggest it aims to discourage cash hoarding by Politically Exposed Persons (PEPs).
However, contrary to popular belief, this move is not a sudden or reactionary measure but part of a broader plan-initiated years ago. The process was set in motion following the Board’s approval in July 2021, making this an implementation phase rather than a new development.
With the official rollout set for 30th March 2025, this article seeks to explain the rationale behind the introduction of new notes and coins, shedding light on key economic and financial factors driving the move.
One of the significant changes is the transition of K2 and K5 denominations from banknotes to coins. This shift is due to the high circulation rate of these lower denominations, meaning they wear out quickly, making frequent reprinting costly. Replacing them with more durable coins is a cost-effective solution.
Many countries have adopted a similar approach to extend the lifespan of low-value currency and reduce reprinting costs. For example, Canada phased out its $1 and $2 banknotes in favor of coins in 2012, and the United Kingdom introduced a more durable £1 coin in 2017 to enhance security and efficiency. Closer to home, South Africa has coins of up to ZAR5 due to the high frequency of use.
Another reason cited for introducing new notes is the similarity between the K10 and K50 banknotes, causing confusion in financial transactions. The redesigned notes will have clearer distinctions to improve cash handling and reduce costly errors.
Counterfeiting remains another key concern, and introducing new notes presents the nation an opportunity to enhance security features. The Central Bank continuously monitors counterfeit money circulation and updates security measures to deter fraudulent activities. Incorporating advanced anti-counterfeiting features will help protect transacting entities from financial losses caused by fake currency.
The hairy one, stirring the most considerable debate among the public is the introduction of K200 and K500 notes. However, it should be appreciated that money handling is a business function requiring efficiency consideration, and when lower denominations can no longer support that, change is essential. The introduction of higher denominations enhances convenience and transaction efficiency in high-value transactions. Banking services, including ATM withdrawals, often impose limits that can be inconvenient when using smaller denominations. A K500 note will allow customers to withdraw larger amounts in fewer transactions, streamlining banking processes and reducing transaction costs.
However, while this change offers practical advantages, it raises concerns about potential misuse in illicit financial activities. Higher-value banknotes have historically been linked to money laundering and black-market dealings, as they make it easier to move large sums of money discreetly. The case of the €500 note in the Eurozone, an equivalent of K14,612.74in Zambia, serves as a cautionary example. The European Central Bank (ECB) stopped issuing the €500 note in 2019, citing concerns that it was being used primarily for illicit transactions, including money laundering and organized crime. Although Germany initially resisted the move, citing its preference for cash transactions, most Eurozone countries fully phased it out. BoZ must consider these risks and implement strict regulatory oversight to prevent the misuse of the K500 note.
Further, this move also intersects with Zambia’s cashless economy agenda. The BoZ has been actively promoting digital financial services (DFS) through initiatives like the ‘Go Cashless’ campaign, launched in November 2022. This campaign encourages the adoption of mobile payments and electronic transactions to enhance financial inclusion and efficiency. At first glance, introducing new banknotes and coins may appear contradictory to this agenda.
Beyond the practical considerations of efficiency and security, this move also raises questions about public trust in Zambia’s fiat (non-commodity-backed) currency. Like all fiat currencies, the Zambian kwacha derives its value not from intrinsic worth but from public confidence in the central bank and the government’s ability to manage monetary policy effectively.
Therefore, the introduction of new banknotes—especially larger denominations—can sometimes trigger fears of inflation or currency devaluation, as has been seen in other economies where rapid currency changes eroded public trust. Clear communication, transparency, and strong monetary policy oversight will be crucial in ensuring that these concerns do not lead to unintended consequences, such as increased hoarding of foreign currency or depreciation of the kwacha.