Malawi devalues kwacha by about 30% amid dollar crunch

Points clés à retenir

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. As it stands, the currency is now worth two-thirds less than it was at the start of the year. This year, Most sub-Saharan African currencies have weakened against the US dollar, fanning inflationary pressures across the continent as import prices surge. The depreciations and devaluations across the region were mostly driven by external factors. Lower risk appetite in global markets and interest rate hikes in the United States pushed investors away from the region towards safer and higher-paying US treasury bonds. This, together with a growth slowdown, leaves policymakers with difficult choices as they balance keeping inflation in check with a still-fragile recovery.