Malawi to restrict forex transactions after currency devaluation

Malawi will restrict foreign currency transactions and crack down on black market dealers after devaluing its currency last week, the finance minister said on Monday.

The southern African country devalued the kwacha currency by 30% against the dollar from last Thursday, saying it was needed to correct supply-demand imbalances in the currency market.

Finance minister Simplex Chithyola Banda said on Monday that cash sales of foreign currency by banks and other authorised dealers would be limited to $2,000, with immediate effect.

Police and other security agencies would prosecute black market forex dealers, he told a news conference.

He also said Malawi had discussed with the World Bank and other donors increasing grants for the poorest under the government's Social Cash Transfer Programme (SCTP) scheme, in order to shield the most vulnerable from the effects of the devaluation, and was negotiating with trade unions to increase salaries.

It is the second time Malawi has significantly devalued its currency in recent years, 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 latest devaluation has prompted an angry response from some citizens, with protests planned. The country also hiked fuel and electricity prices on Friday.

Banda defended the devaluation, saying it would help revitalise local production and attract foreign investors.

Reuters