New foreign exchange regime for the oil sector in Angola increases cash in circulation

6 December 2010

Luanda, Angola, 6 Dec – The new Angolan foreign exchange regime for the oil sector, which is due to be adopted before the end of the year, will lead to an injection of capital in the Angolan banking system, which according to some specialists could total billions of dollars.

Agostinho Pereira de Miranda, chairman and partner of law firm Miranda Correia Amendoeira & Associados, recently said at a conference organised by The Economist magazine in South Africa that legislative changes in Luanda would lead to an injection of over US$10 billion per year.

“If the law had been in place in 2009, Angola’s banks would have seen transactions involving a further US$10 billion, paid for by oil companies to their sub-contractors,” said Miranda, a lawyer linked to several foreign oil companies and whose firm has a strong presence in Portuguese-speaking countries.

This figure, he said at the “Angola Business and Investment Summit” is the amount that oil companies pay each year to foreign companies hired to provide services in Angola, which are currently paid for abroad, without passing through Angola’s banks.

But, with the new law, which is expected to be approved this year, the transaction will have to be carried out via banks based in Angola.

The current foreign exchange regime is based on the 2007 Exchange Law.

The new law proposal was analysed by the Angolan Permanent Commission of the Council of Ministers on 22 November and will now be submitted for approval to the National Assembly.

This regime, according to a Council of Ministers statement, aims to “establish specific and differentiated standards,” for the oil business, “taking into account its strategic importance for the country’s development.”

The legal diploma, “takes into account the complexity and diversity of the operations related to oil prospecting, exploration and export, as well as the high level of investments by national and foreign bodies that the sector involves,” said the Angolan government.

The government also said that the new rules would be introduced in phases.

The National bank of Angola last year adopted a number of transitory measures to preserve the country’s monetary reserves, at a time when they were seeing a significant drop, as part of a more restrictive position on foreign exchange licensing of transactions.

Changes were made to the rules for opening and moving accounts denominated in national and foreign currencies by residents and non residents, as well as rules for loan institutions to have obligatory reserves.

Current account operations by “invisible” account holders now require prior authorisation from the BNA when they are over US$100,000, a fifth of the previous limit.

These measures have restricted the activities of some local banks and the capacity of some companies to access foreign currency and transfer funds out of Angola. (macauhub)