Malawi's central bank has devalued
its currency, the kwacha, by 50% and scrapped its peg to the US dollar, in a
bid to improve relations with donors.
The International Monetary Fund
has long urged Malawi
to cut the value of its currency, saying this would boost exports and reduce
demand for imports.
However, ex-President Bingu wa
Mutharika, who died in April, said devaluation would lead to inflation.
New President Joyce Banda is
trying to persuade donors to restore aid.
One dollar is now worth 250
kwacha, up from 168
"The devaluation of the
kwacha and the liberalisation of the foreign exchange market are expected to
continue the government's efforts to reach agreement with the IMF," said
Reserve Bank of Malawi
Governor Charles Chuka, adding that this would hopefully lead to more donor
funding in the next few months.
Economists say they do not expect
the move to immediately lead to higher prices, as many businesses were
expecting the move and were already using the new exchange rate.
About-turns
In recent years, Malawi has run
short of foreign currency after donors cut aid and demand fell for its main
export, tobacco.
This led to a lack of fuel in the
country.
Last week, President Banda said
she did not want Sudan's
President Omar al-Bashir, accused of war crimes, to attend a summit in July.
She says she feared the
"economic implications" if Mr Bashir attended the African Union
meeting in the country.
This was another about-turn on
the position of her predecessor.
She has also fired Mutharika's
widow, Callista, from her job as coordinator for safe motherhood, the AFP news
agency reports.
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