Historical Sketch

In 1889, the British South Africa Company (BSAC) of Cecil Rhodes was granted a concession for the exploitation of territories in south central Africa. The concession area was initially referred to as “Zambezia”, later split into Northwest and Northeast Zambezia. In 1891, the territory was extended towards the Lake Malawi, the new acquisition being called British Central Africa protectorate. The BSAC continued its conquest with the Mashonaland and Matabeleland protectorates in 1894. A year after, the different BSAC territories were reorganized and renamed into Northwest, Northeast, and Southern Rhodesia, the two northern ones being merged in 1911. The Central Africa protectorate was handed over to British colonial administration in 1907 and subsequently renamed Nyasaland. In 1953, the three colonies were joint into the Central African Federation (of Rhodesia and Nyasaland), which did not prove successful. In preparation for independence, the federation was dissolved again. In 1964, Nyasaland attained independence as Malawi, and two years later, the republic was proclaimed.

Monetary History Overview

The British South Africa Company did not introduce any monetary order into its possessions, in the 1890s the correaponding legislation of the Cape Colony had been adopted globally. After the handover of Nyasaland, the British colonial administration formalized this with the 1913 currency ordinance. In 1938, Britain established a currency board for Southern Rhodesia, creating the Southern Rhodesian Pound as distinct currency. The jurisdiction of the currency board also comprised Northern Rhodesia and Nyasaland, which thereby also separated from the South African monetary area. The common currency area was renamed in 1954, but the Central African Pound was identical to its predecessor. In 1964, independent Malawi immediately withdrew from the common currency area with neighboring Zambia and Rhodesia (later Zimbabwe). In July of the year, the Reserve Bank was established and the Malawian Pound became the national currency. It was at par with the Pound Sterling and followed the 1967 devaluation. At the same time as Great Britain, Malawi decimalized its currency introducing the Malawian Kwacha at half a Pound in 1971. In 1973, the Kwacha's link to the Sterling was severed, and after a short floating period, the currency repegged to the IMF Special Drawing Rights (SDR) unit in 1975. In the early 1980s, the exchange rate was devalued twice and set to float in 1984. For the following decade, the exchange rate was kept artificially stable with intermittent smaller devaluations. In 1994, the policy changed, and the Kwacha depreciated by 75% in short time. Since then, shorter periods of relative currency stability are interrupted by sharp declines that have eroded more than 98% of the currency value so far.

Malawi joined the International Monetary Fund (IMF) on 19.07.1965.

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