Central bank floats currency
The Malawian Central bank yesterday floated the official currency, the Kwacha, leading to an immediate devaluation of around one third.
The move means that the US dollar is now worth around 250 Kwacha compared with 166 Kwacha on Friday. The black market had long been functioning on a price much closer to the new official rate and economists are saying that the move is unlikely to lead to large increases in prices, although there was reported panic buying yesterday.
By taking this decision President Joyce Banda is moving closer towards agreement with the International Monetary Fund (IMF) which in turn should result in much needed funds being released from international donors. By floating the Kwacha it will also encourage the purchase of domestic products over imported goods and by freeing the flow of foreign currencies should also help to ease petrol shortages.
The new president is taking a stridently different line to the former president who died suddenly last month. She is determined to repairs relations with international donors upon which her country has relied heavily in the past.