Effects of devaluation of currency on a developing country like Malawi (a small African country)

Abstract

The Malawi Government was a British colony and after independence the local currency, the Malawian Kwacha (MWK) up to 1973 played to the same level with the British Pound (GBP). From that time, the authorities used many policies for proper management of the economy. These include and not limited to the devaluation, floatation and exchange rates adjustments with the view of creating conducive environment for economic growth. The authorities tried to manage the devaluation and floatation of the currency most importantly because its results have widespread effects on the whole economy. In a country like Malawi, where the exports are not at par with the imports and the equation being in favour of the latter it can be disastrous to leave these instruments uncontrolled. These things affect the country's relative price structure between tradable and non-tradable goods and later the overall level of domestic prices. The devaluation and floatation of the currency are among the most important tools in management of the economy and price stabilisation in most developing countries.