Malawi Kwacha Devalued By 44 Percent

By Joseph Dumbula

The Reserve Bank of Malawi (RBM) has devalued the Malawi Kwacha by 44 percent, to the expectations of bloated pricing of goods and services of people online most of whom feel the status is detrimental to the economy.

According to RBM Governor Wilson Banda, the decision follows the supply-demand imbalances which remain on the market despite previous adjustments of the exchange rate through the auction system.

He added that arbitrage opportunities have resurfaced in the market due to mismatch in the exchange in the cash and telegraphic transfer markets.

The devaluation comes as Malawi is wooing the International Monetary Fund to approve a new Extended Credit Facility with the country. IMF executive board meets next week to decide the country’s fate.

The decision comes amid a rise in goods and services, which government has among other things aligned to the war in Ukraine and effects of the Covid19 pandemic.

The average inflation rate in Malawi was forecast to continuously decrease between 2023 and 2028 by in total 21.2 percentage points. After the fifth consecutive decreasing year, the average inflation rate is estimated to reach 6.52 percent and therefore a new minimum in 2028.

Malawi remains one of the poorest countries in the world despite making significant economic and structural reforms to sustain economic growth. The economy is heavily dependent on agriculture, which employs over 80% of the population, and it is vulnerable to external shocks, particularly climatic shocks.