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Malawi Introduces Forex Auctions to Determine Currency Level

FILE - A trader counting Malawi currency, the Kwacha, in Blantyre, Malawi.

The Central Bank of Malawi is expected to hold its first foreign exchange auction Friday to determine a market-clearing price for the local kwacha currency against the U.S. dollar and other major currencies, it said.

Malawi, an East African nation of roughly 20 million people, devalued its currency by 25% last May to bolster dwindling foreign currency reserves which has come under pressure by skyrocketing commodity prices and declining revenue from major export - tobacco.

The country has since witnessed chaotic queues at fuel stations which are running dry due to dollar shortages, forcing it to turn to the International Monetary Fund (IMF) for financial support.

In the Reserve Bank of Malawi's periodic foreign exchange auctions, authorized dealer banks will submit bids to sell foreign currency to the central bank at prices determined by participating banks.

Bids will be for a minimum of $50,000 and in multiples of $10,000 thereafter, the bank said in a statement.

"These auctions will ... promote transparency in the determination of the exchange rate," it added.