Panic in Malawi over currency devaluationBy BBC | Monday, May 7   2012 at  20:25

Shoppers in Malawi have been scrambling to buy basic goods, fearing huge price rises after the currency was devalued by 50 per cent.

The BBC's Raphael Tenthani in Blantyre said that many shops had run out of staple foods such as sugar, cooking oil and bread by the end of Monday.

The kwacha was devalued as part of moves by the new government to restore donor funding.

The former government had rejected IMF calls to devalue the currency.

BBC reporter said that other goods such as rice, maize flour and orange squash were running short in Blantyre's Chichiri shopping centre - the main retail area in Malawi's biggest city.

The same panic-buying has reportedly also happened in Malawi's main towns.

The scramble comes despite economists saying they did not expect the devaluation to immediately lead to higher prices, as many businesses were expecting the move and were already using the new exchange rate.

The central bank announced that one dollar would now be worth 250 kwacha, up from 168, while the peg to the US currency would be scrapped.

"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 donor funding in the next few months.

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, former President Bingu wa Mutharika, who died in April, had rejected the calls, fearing it would increase inflation.

New President Joyce Banda is trying to improve relations with donors and get aid restored.