Exchange depreciation puts imports in Angola and Mozambique under pressure

The economic crisis triggered by the Covid-19 pandemic is forcing a depreciation of the currencies of Angola and Mozambique, and thus making imported products more expensive, particularly from China, according to various market agents.

Figures from Banco de Fomento Angola (BFA) show that until the end of March the Angolan currency, the kwanza, had lost more than 10% of its value against the dollar in relation to the beginning of the year, and more than 40% in recent months, with the dollar officially trading at 536.7 kwanzas.

On the unofficial market, according to the Kinguila Hoje website, the value is even higher – 650 kwanzas.

In its newsletter about the economic situation in Angola, the BFA gives an account of a “significant depreciation” of the kwanza in recent weeks, since the drop in Angolan oil revenues led to, “expectations among market participants of a substantially smaller supply of foreign currency from April.”

The “significant downward pressure on the kwanza,” is expected to “increase in the coming months,” according to the BFA, which is keeping a forecast of 20% for inflation in Angola in 2020, up from 17.5% last year.

The devaluation of the kwanza also puts pressure on the component of debt denominated in foreign currency, raising the percentage of debt in relation to the product of the economy, which has led some African countries to assume the need to restructure or request a debt pardon, to tackle the economic crisis caused by Covid-19, which has forced the population into confinement and a complete stoppage in several countries, such as Angola and Mozambique.

The import of products, particularly from China, is expected to suffer, the president of the Angola-China Chamber of Commerce, Manuel Arnaldo Calado told Portuguese news agency Lusa.

“I do not know of any product that is in Angola or has already been in Angola, that China does not have on offer. China is really important for us, because it supplies everything, from the cheapest to the most expensive,” Calado said.

The Mozambican currency, the metical, has also seen a sharp devaluation in recent weeks, and is currently rating at 68 meticais per dollar, 9% down on last year’s average (62.5 meticais).

The devaluation continued even after an injection of US$500 million by the Bank of Mozambique in the interbank foreign exchange market, for a period of nine months.

The downturn of the metical was expected by the Mozambican government, whose Council of Ministers spokesman, Filimão Suaze, acknowledged in March that a depreciation of the currency against the dollar would have an impact on domestic prices, predicting “a failure” to meet deadlines in the deliveries of various products due to production stoppages at the beginning of the year in China, one of the main sources of imported products. (macauhub)