Malawi devalues kwacha currency by 50% after IMF calls

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.

 Joyce Banda has reversed several of her predecessor's policies

"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 donors 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.

Ex-World Bank managers back Nigerian

Okonjo-Iweala would bring the combination of her experience as finance and foreign minister of a large and complex African country with her wide experience of working at all levels of the Bank's hierarchy in different parts of the world.

A group of former World Bank officials on Wednesday endorsed Africa's candidate to lead the Bank, Nigerian Finance Minister Ngozi Okonjo-Iweala.

 In an open letter, 39 former managers and economists called on the Bank's executive board to make their decision on merit, when the board for the first time considers more than one candidate for the job.
Tunisia's central bank chief, Mustapha Nabli, a former head of the Bank's Middle East and North Africa region, also signed. His country has not endorsed a candidate.
Okonjo-Iweala "would bring the combination of her experience as finance and foreign minister of a large and complex African country with her wide experience of working at all levels of the Bank's hierarchy in different parts of the world, from agricultural economist to managing director."
While the other two candidates also have strong qualifications, "she would be the outstanding World Bank president the times call for."

The World Bank plans to select the successor to outgoing president Robert Zoellick by April 20, the start of its spring meetings with the IMF.
"We believe that Mrs. Okonjo-Iweala has outstanding qualifications across the full range of relevant criteria," they said.
Okonjo-Iweala, a former World Bank managing director, and Jose Antonio Ocampo, a former finance minister of Colombia, are competing with the US nominee Jim Yong Kim, a public health expert and president of Dartmouth College.
Under a tacit agreement, the US picks the World Bank president, always an American, and Europe puts a European at the helm of the International Monetary Fund, the Bank's sister institution.
Writing in their personal capacity ahead of the candidate interviews next week, the ex-Bank officials said "we care too much for the institution and for its historic development mission not to speak up."