Malawi devalues currency by 48%

2012-05-07 13:11

Johannesburg - Malawi's central bank devalued the country's currency by about 48% on Monday, in line with a demand by the International Monetary Fund (IMF).

As per the new exchange rate, 250 kwacha would be worth $1 on the official market. Last week, 168 kwacha bought a US greenback. The new price is closer to the black market rate.

"Following this devaluation, the kwacha is now fully liberalised," Charles Chuka, the head of the Reserve Bank, said in a statement made available to local media.

The central bank had warned business over the weekend that it would be taking the move.

The IMF has argued for about a year that the currency was overvalued and hurting the Malawian economy.

Former president Bingu Wa Mutharika rejected the IMF demand, which was central to a proposed $79m loans package desperately needed by the impoverished southern African nation.

However, Mutharika died in office last month and was replaced by Joyce Banda, who has signalled her desire to reform Malawi's ailing economy.

Banda indicated in recent weeks that she was in favour of the devaluation, hoping it will help bring back key international donors that her predecessor chased away through a mix of domestic authoritarianism and objection to foreign advice.

Malawi, a landlocked nation in southern Africa, is ranked as one of the least developed nations in the world. Foreign aid made up about 40% of the government budget. Even more international funds went to development projects in the country.

- SAPA