Angola’s central bank’s new currency plan could see kwanza devaluing by 30% – economist

LUANDA, Jan 4 (Reuters) – It was Angola’s depleting foreign reserves that prompted the central bank to pursue a more flexible exchange rate strategy, the regulator said on Thursday.

The comment came a day after plans were unveiled to restructure foreign debt and allow looser trading of the kwanza.

The central bank said on Wednesday it would shift from a currency peg to a trading band, which would keep the kwanza’s value against the U.S. dollar within an as-yet defined range.

The changes will be implemented from this month.

Kaan Nazli, senior economist at investment management firm Neuberger Berman, estimated the new currency plan could result in the kwanza effectively devaluing by 30 percent.

“Of course they won’t call it like a devaluation … but ultimately it is not too far off what the (International Monetary Fund) has identified as the overvaluation of the exchange rate,” Nazli told Reuters.

Sub-Saharan Africa’s third largest economy also plans to renegotiate its external debt, which stands at $38 billion, Finance Minister Archer Mangueira said on Wednesday.

Angola’s dollar-denominated bond, which has $1.5 billion outstanding and matures in November 2025, fell 0.2 cents in price to 115.80 cents.

Most of Angola’s external debt is held by multinational lenders like the IMF or by foreign governments, including China, which has huge oil-for-infrastructure deals with the southern African nation.

Angola does not have a developed debt or stock market so a more flexible exchange rate is less significant for investors than in more developed markets. Lenders like the IMF have been calling for looser currency controls, however.

“Multilateral lenders will look favourably on the developments, so they might be more willing to restructure some of the debt,” said Cobus de Hart, analyst at NKC African Economics.

The central bank said in a statement on Thursday its decision to ease currency controls came after it had analysed the “macroeconomic fundamentals of the Angolan economy, and particularly the decreasing trend of international reserves”.

The regulator has been trying to defend the currency using foreign exchange reserves, but reserves have more than halved since 2013 to about $14 billion.

Oil accounts for around 90 percent of Angola’s government revenue and years of depressed crude prices have hammered once booming economic growth and eroded foreign currency reserves.

Angola, Africa’s second biggest oil exporter, has maintained a quasi-pegged exchange rate of about 166 kwanza per dollar, even though the dollar buys about 400 kwanza on a thriving black market.

Under the new system, forex trading will be carried out at trading auctions where a weighted average of offers from the central bank and commercial banks will set the exchange rate.

“In other words, the exchange rate is now determined by the transactions that take place in the primary market by auction,” the central bank said. (Reporting by Herculano Coroado; Additional reporting by Tiisetso Motsoeneng and Ed Stoddard in Johannesburg and Karin Strohecker in London; Writing by Joe Brock; Editing by Catherine Evans/Jeremy Gaunt)

Related Content

Coronavirus: African Union Member States reporting COVID-19 cases As of 26 May 2020, 9am EAT

Central (12,167 cases; 343 deaths; 3,226 recoveries): Burundi (42; 1; 20),Cameroon (4,890; 165; 1,865), Central African Republic (652; 1; 22), Chad (687; 61; 244), Congo (487; 16; 147), DRC (2,297; 67; 337), Equatorial Guinea (719; 7; 22), Gabon (2,135; 14; 562), Sao Tome & Principe (258; 11; 7) Eastern (12,809; 349; 3,409): Comoros (87; 1; 21), Djibouti (2,468; 14; 1,079), Eritrea (39; 0; 39), Ethiopia (655; 5; 159), Kenya (1,286; 52; 402), Madagascar (542; 2; 147), Mauritius (334; 10; 322),

BFA Asset Management on Lusophone Africa’s COVID-19 response plan

Rui Oliveira, CEO at BFA Asset Management joins CNBC Africa to unpack African Lusophone countries response to the Covid-19 pandemic as well as these countries monetary responses to aid the economy during the current social and financial crisis.

Africa Women Innovation and Entrepreneurship Forum (AWIEF) Awards 2020 call for nominations announced

The Africa Women Innovation and Entrepreneurship Forum (AWIEF) (www.AWIEForum.org) is pleased to announce the call for nominations for AWIEF Awards 2020. This year marks the fourth edition of the highly-anticipated AWIEF Awards which serves as the premier platform to highlight achievements in women entrepreneurship across Africa. AWIEF Awards are Africa’s top honours for female founders and entrepreneurs designed to recognise and celebrate their contribution to the growth of Africa&rsqu

Coronavirus – African Union Member States (54) reporting COVID-19 cases (112,290) deaths (3,359), and recoveries (44,920)

African Union Member States (54) reporting COVID-19 cases (112,290) deaths (3,359), and recoveries (44,920) by region: Central (11,906 cases; 340 deaths; 3,094 recoveries): Burundi (42; 1; 20), Cameroon (4,890; 165; 1,865), Central African Republic (604; 1; 22), Chad (675; 60; 215), Congo (487; 16; 147), DRC (2,297; 67; 337), Equatorial Guinea (719; 7; 22), Gabon (1,934; 12; 459), Sao Tome & Principe (258; 11; 7). Eastern (12,291; 332; 3,295): Comoros (87; 1; 21), Djibouti (2,270; 10; 1,064

Subscribe to our newsletter

Sign up for free newsletters and get more CNBC AFRICA delivered to your inbox

More from CNBC Africa

African born Billionaire Elon Musk’s net worth zooms past Warren Buffett’s

The blistering rally also puts Musk in reach of a payday potentially worth $1.8 billion, his second jackpot from the electric car maker in about two months.

U.S. sets record for new COVID cases third day in a row at over 69,000

“If we don’t adopt this best practice it could lead to a shutdown of business,” the Republican governor told local KLBK-TV in Lubbock, adding it was the last thing he wanted.

South Africa set to make SAA funding commitment, official says

JOHANNESBURG (Reuters) - The South African government is “on course” to provide a funding commitment for the restructuring of loss-making South African...

Akinwumi Adesina pays tribute to Prime Minister Amadou Gon Coulibaly

A humble man. A selfless man. A faithful man. A shining light. We met and spoke together on several forums around the world: on the plane, at airports, in high level forums and summits. My impression of him was the same: calm; wise; insightful. A man of few words, whose every word was always well honed for impact. He spoke always from his heart. An he had a heart of gold.

Partner Content

Maktech’s Godwin Makyao: Now Is A Time of Entrepreneurial Opportunity in East Africa

As an executive decision-maker in both the telecommunications and tourism industries, Godwin Makyao could not have experienced a more diverse set of...

Sanlam launches urgent job-preservation initiative in response to COVID-19

Sanlam Investments is responding to the COVID-19 pandemic through large-scale support of the recovery of South African companies, from small enterprises to...

Trending Now

Congo justice minister resigns after judicial reform dispute

KINSHASA (Reuters) - The Democratic Republic of Congo’s Justice Minister Celestin Tunda tendered his resignation on Saturday in the wake of a...

Veteran Zimbabwe farmer pours cold water on $58 million mission from Belarus with love.

“Belarus tractors have never been known for their quality or power. They were never bought by Zimbabwe farmers in the past. Training up 1000 Zimbabwe farmers isn’t the answer.

Congo central bank keeps 2020 economic growth forecast at -2.4%

(Reuters) - The Democratic Republic of Congo’s central bank kept its 2020 economic growth forecast unchanged at -2.4% because of the uncertainty...

South Africa’s rand recovers but caution remains, stocks slip

JOHANNESBURG (Reuters) - South Africa’s rand recovered in afternoon trade on Friday, after sliding earlier due to concerns about rising COVID-19 cases...
- Advertisement -