LILONGWE (Reuters) - Malawi President Joyce Banda dissolved her cabinet after officials in her government were arrested on suspicion of lining their pockets with state funds, her office said on Thursday.

It said Banda, who came to office in April 2012, "will announce a new cabinet in due course," without elaborating. About 10 junior government officials have been arrested so far for suspected graft.

A small group of protesters marched in the capital Lilongwe on Thursday and delivered a petition calling for the sacking of top officials, including Finance Minister Ken Lipenga, over the scandal.

Banda, who faces election next year, has won acclaim in the West for austerity measures and gestures to bolster the economy of the aid-dependent, impoverished country.

But moves such as an IMF-backed devaluation of the kwacha currency have stoked inflation, raised the price of food for rural poor and cut into Banda's domestic support.

(Reporting by Mabvuto Banda; Writing by Jon Herskovitz; Editing by Mark Heinrich)