BLANTYRE, May 7 – Malawi devalued its currency by nearly 34 percent against the US dollar Monday as it floated the local kwacha, bowing to a key demand of the International Monetary Fund to fix the troubled economy.
The central bank’s notice of official exchange rates put one US dollar at 250 kwacha, compared to 166 kwacha on Friday, a 33.598 percent value drop.
“Following this devaluation, the kwacha is now fully liberalised,” the Reserve Bank of Malawi said in a statement.
On the black market, the US dollar has sold at more than 300 kwacha, a disparity that drove foreign currency out of the banking system and into the hands of informal dealers.
“At 250 kwacha per dollar the exchange rate is well adjusted, as the black market is certainly under-devalued,” the central bank said
The late president Bingu wa Mutharika had fixed the exchange rate in 2005.
Since then he had steadfastly refused to make a major devaluation, which he argued would hurt the poor.
The IMF has for months called for a devaluation to end a shortage of foreign currency that has left Malawi unable to import enough fuel to keep the nation running.
After Mutharika’s sudden death last month, the new President Joyce Banda has moved quickly to restore relations with international lenders and donors.
Several key donors – including former colonial power Britain – suspended aid to Malawi, citing concerns about growing authoritarian tendencies in Mutharika’s government.
The IMF said in June last year that its programme with Malawi was “off-track” because the government had failed to review a $79.4-million (55.7-million-euro) credit facility meant to cushion the foreign currency shortages.