(Previous Blantyre, adds details, quote)
LILONGWE May 7 (Reuters) – Malawi’s central bank scrapped
its kwacha peg on Monday and allowed the currency to
devalue by 50 percent, heeding calls from the IMF to cut what
was seen as an artificially high exchange rate that was hitting
the impoverished state’s economy.
Commercial banks were selling the kwacha at 250 to the
greenback, well above the previous official rate of 165 and
close to the black market rate of about 275.
“At 250 per dollar, the exchange rate is well adjusted as
the black market is certainly under-devalued. Following this
devaluation, the kwacha is now fully liberalised,” the Reserve
Bank of Malawi said in a statement.
The bank is scheduled to hold a news briefing to announce
the official removal of the peg along with other foreign
exchange restrictions.
The bank sent directives to commercial banks at the weekend,
saying the peg would be scrapped from Monday and the market
would determine rates.
“We’re sitting as an individual bank this morning to decide
by what margin to adjust the exchange rate,” said Anderson
Kulugomba, Managing Director of Nedbank Malawi, a subsidiary of
South Africa’s fourth largest banking group, Nedbank.
Malawi has been hit by a foreign exchange shortage stemming
from strained ties between former President Bingu wa Mutharika
and international donors, which led Western powers to scrap aid
that normally accounted for 40 percent of its budget.
New President Joyce Banda, who came to office a month ago
after Mutharika died of a heart attack, had pledged to devalue
the kwacha and restore the aid flow.
(Reporting by Frank Phiri and Mabvuto Banda; Writing by Jon
Herskovitz; Editing by Ed Cropley)
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