In view of recently rapid imported consumer price inflation, efforts to reduce the metical's overvaluation to boost export competitiveness are now likely to be put on hold. Through its interventions, the central bank appears to have put a floor under the value of the metical at around MT37:US$1 and MT5.1:R1 since late July. We expect the recent unrest over the high cost of living to encourage the authorities to let the metical strengthen slightly amid strong expected inflows of foreign investment in 2011. The BDM will probably seek to hold the value of the metical steady in 2012 at a level that limits imported inflation while not eroding the country's export competitiveness through strong appreciation. Consequently, we forecast that the exchange rate will average MT32:US$1 in 2011 and MT31:US$1 in 2012.