BLANTYRE (Reuters) – Malawi’s central bank said in a notice to authorised dealer banks seen by Reuters that it was devaluing the local kwacha currency’s exchange rate to the dollar by about 30% from Thursday.
The notice said the kwacha’s exchange rate would be adjusted to 1,700 kwacha to the dollar from a selling rate of about 1,180 kwacha to the dollar.
A central bank spokesperson was not immediately available for comment.
It is the second time the southern African country has significantly devalued its currency, after doing so first in May 2022 to prop up dwindling foreign currency reserves pressured by rising commodity prices and declining revenue from tobacco exports.
The notice to banks said the exchange rate adjustment was needed because there were still supply-demand imbalances in the currency market and arbitrage opportunities had resurfaced.
Spot checks on some players indicated that the market was able to clear import bills at the new exchange rate, the central bank said.
“The Reserve Bank of Malawi will closely monitor developments in the market to avoid disorderly behaviour among market players that may cause excessive volatility,” it said.
A senior local banker said the move was widely expected.
“It works in short term and only addresses demand side for now, but what is required is to sort out supply side,” he said.
(Reporting by Frank Phiri; Additional reporting by Rodrigo Campos in New York; Writing by Alexander Winning and Nellie Peyton; Editing by Sandra Maler)