The Malawi government has finally devalued its currency- the Kwacha- with about 48 percent to bow to pressure by the world’s major international monetary institutions- the International Monetary Fund (IMF) and the World Bank.
According to a statement made available by the Reserve Bank of Malawi and signed by its Governor Charles Chuka on Monday, the official exchange rate is now K247.50 to one US dollar from K167, representing a 47.9 percen decreaset.
The governor further says in the statement following the devaluation, the kwacha is now fully liberalized as the black market was “certainly under-devalued.”
The development comes days after President Joyce Banda’s pre-emption of the devaluation when she told the media her government would let the currency be liberated, a move sharply criticised by economic experts.
President Banda said government would devalue the kwacha by 40 percent, a move that would unlock halted aid from the Western donors by meeting conditions set by the International Monetary Fund (IMF).
A team of economic experts from the IMF is expected to jet into Malawi at any time, according to Finance Minister Ken Lipenga, to discuss the recovery of its programme with Lilongwe.
After the president’s announcement, the finance minister said devaluation would not happen immediately claiming what President Banda said was only stating government policy.
Since taking over power on April 7th, Banda's government has already held fruitful talks with the IMF, World Bank, USA and South Africa, among others, aimed at restoring the battered economy.
Banda’s administration has also resumed relations with the United Kingdom, the nation’s biggest donor, exactly a year after former President Bingu wa Mutharika clashed with it by expelling its envoy.
During her first official visit as President to South Africa, Banda told the media in that country that Malawi was advised to devalue the kwacha three years ago but “we didn’t listen, so now we have to do it all at once.”
The Malawi kwacha was last devalued in August 2011 when it moved by 10 percent, a move which did not amuse the two leading world financial institutions, IMF and World Bank, as it was not sufficient to improve the country’s foreign currency availability.
Malawi, one of the world’s poorest countries with a gross domestic product of about $5 billion, according to the World Bank, is currently struggling to contain fuel and forex shortages after late Mutharika rejected IMF advice.
But with the coming in of Banda, most foreign donors including the World Bank and IMF have already showed willingness to pump in grants and loans to salvage the slumping economy.