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Malawi’s currency has lost nearly half its value against the US dollar, sparking concerns from some consumers in the southern African country that basic goods will soar in price.
Others have hailed the central bank’s devaluation move as “overdue”.
The bank’s 44% decrease was brought in to better reflect the kwacha price in different markets.
One thousand seven hundred kwacha will now be needed to buy one US dollar, up from 1,180, its statement said.
It is the second time in 18 months that Malawi, one of the poorest countries in the world, has significantly decreased the value of the kwacha in relation to the US currency.
It first did so in May last year in order to prop up dwindling foreign currency reserves, pressured by rising commodity prices and declining dollar revenue from tobacco exports.
Central bank chief Wilson Banda said the most recent exchange rate adjustment was needed because there were still supply-demand imbalances in the currency market.
Several Malawians on social media have shared the worry that a second devaluation could only mean a spike in the price of basic goods.
A fall in the currency makes all imports more expensive and the rise in prices will be passed on to the consumers.
Opposition politician and former central bank chief Dalitso Kabame was among the critics.
He called the devaluation “reckless”, adding “there will be no recovery from the macroeconomic meltdown. It will only make the suffering experienced by Malawians worse as prices of basic goods and services… will soar”.
However, other Malawians argued the devaluation should have happened a long time ago as it was obvious that the central bank price did not reflect the kwacha value in the real world.
Economists believe the central bank may have been swayed to devalue by the prospect of Malawi receiving an Extended Credit Facility, a form of financial assistance, from the International Monetary Fund (IMF).
The IMF board is set to meet next week to decide whether to grant Malawi the facility.
It is thought Malawi has been pressured by the IMF to devalue the kwacha, with the organisation believing it will stabilise the economy in the long run.
The economy has been undergoing turbulent times, characterised by an acute shortage of petrol and diesel, as well as high inflation.
Officials have blamed the economic downturn on external factors, such as a devastating cyclone earlier this year and the war in Ukraine.