National Bank of Angola allows national currency to float freely

24 October 2019

The formal exchange rate of the Angolan currency will fluctuate freely until it balances with the informal market rate, said the governor of the National Bank of Angola, announcing on Wednesday in Luanda the decisions made at an extraordinary meeting of the monetary policy committee.

José de Lima Massano said that in order to consolidate the floating exchange rate regime, a decision had been made to remove the 2% margin on the reference exchange rate practiced by commercial banks in the trading of foreign currency in the interbank market, which currently has higher demand than supply, as well as with their customers

The Monetary Policy Commission decided to keep the basic interest rate, the BNA Rate, unchanged at 15.5%, to set the 10% interest rate for the 7-day maturity facility, to keep the 0% interest rate for the overnight liquidity absorption facility and adjust the reserve requirement ratio for national currency from 17% to 22%.

It also decided to relax the limits applicable to the various payment instruments for goods imports by increasing the advance payment limit from 25,000 euros to US$50,000 per transaction, with no annual cap, the cap for remittance payments. from 50,000 euros to US$200,000 per transaction, with no annual cap, and eliminate the current limits on payments in the form of documentary collections and documentary import credit.

It also decided to set the maximum annual value for private foreign exchange operations at US$120,000, except for those related to health and education expenses which will not be subject to any limits, whenever they are paid directly to the institutions.

The Monetary Policy Commission has decided to shorten the deadline for the settlement of letters of credit open under limits set by the BNA, and the importer may pay them as soon as they present the documents proving the goods have entered Angola.

The governor of the BNA said that once these changes in the foreign exchange market are made, the country will be in a better position as the beginning of the macroeconomic stabilisation programme to set a kwanza exchange rate against the main currencies determined by the market.

The kwanza has lost 32% of its value against the dollar since the beginning of the year, with 18% of this loss occurring in October alone, so it now takes 453 kwanzas to buy a dollar, compared with the 600 kwanzas needed to buy 1 dollar on the informal market.

Prior to the entry into force of the new foreign exchange market model in January 2018, replacing the previous administrative exchange rate system, the US dollar was worth 167 kwanzas, meaning that the Angolan currency has since lost 63.13 % of its value. (Macauhub)