Angolan central bank to reduce difference between official and black market exchange rates

2 January 2018

The Angolan National Bank this year plans to implement a “controlled adjustment of the exchange rate” gradually to reduce the difference between the official exchange rate, of 166.7 kwanzas per US dollar, and the rate on the black market, of 400 kwanzas per dollar, state newspaper Jornal de Angola reported.

Once this is achieved, the central bank will introduce a “managed float regime”, which will be very close to the easing requested by the International Monetary Fund.

This devaluation of the currency coupled with new market dynamics driven by economic expansion (4.9%), employment and disposable income, variables that put upward pressure on demand and prices, will lead the accumulated inflation forecast for 2018 to be 28.79%.

This development disrupts the balance between prices, raising the costs of factory production, heavily supported by diesel-fuelled generators as well as freight, with costs being charged to consumers, and thus prices are expected to increase by six percentage points.

The Monetary Policy Committee of the National Bank of Angola decided at its last meeting in 2017 to keep the main benchmark interest rates in the market unchanged, namely the BNA rate at 18% per year.

The overnight interest rate of the marginal lending facility was kept at 20% per year, the marginal lending facility remained unpaid and the reserve requirement coefficient on deposits in local currency was kept at 20%.

The Angolan central bank increased the BNA rate from 16% to 18% on 30 November, 2017, in order to halt rising inflation, which over the previous 12 months stood at 27.76%, against 28, 96% in the previous month and 41.15% in the same period of 2016.

The National Bank of Angola increased the key interest rate by two percentage points from 14% to 16% on 30 June, 2016. (macauhub)