Angola: kwanza has devalued by 7% since January, but no reason to panic

The governor of the National Bank of Angola (BNA) said today that there is no reason to panic over the devaluation of the kwanza, speaking of a “market correction”, which the regulator wanted to “smooth” by placing Treasury bonds on the market.

José de Lima Massano, who was speaking in Bié after the 111th meeting of the Monetary Policy Committee, noted that oil and gas generate about 95% of foreign exchange resources for Angola, so any change in the quantities produced or prices on international markets influences the functioning of the economy.

“And in the first four months of the year, what we observed was a drop in export revenues,” he stressed, indicating that this had reflections on the supply of foreign exchange that were also visible on the Bloomberg FXGO platform, available for foreign currency negotiations between major exporters and buyers.

“[Especially in the last two months] we registered a 40% drop in that platform of foreign exchange resources, and we began to see many situations, some of which we had already overcome, of pending operations,” said Lima Massano.

The official said they began to receive complaints about operations not occurring within the due deadlines.

“The instrument that we have for correction between supply and demand is the price, and what we are seeing is this new adjustment, determined by market forces, which is leading to pressure on the national currency,” he said, indicating that since January, the kwanza has depreciated 7% against the dollar.

The governor pointed out that the BNA has responsibilities for price stability in the economy, stressing that the exchange rate is a very important factor for price formation.

Still, it is also responsible for maintaining international reserves, which should be kept at the minimum level of six months of imports, where they currently are.

On the other hand, he noted that the BNA acts whenever there are distortions in the market, especially when they can be understood as transitory.

“At this moment, we have no indication that the reduction observed in the supply of foreign exchange in the last two months is something temporary, hence if we had to intervene to maintain the exchange rate, the international reserves would have already fallen by about a billion dollars, an exercise that would cause further damage to the economy,” he explained, speaking of market adjustments.

“The market has been adjusting, but we understand that this adjustment also causes risks and, for this reason, we decided to make securities in foreign currency held by the BNA available to economic operators and citizens, investing in national currency,” he stressed.

The governor considered that there are conditions to preserve savings and manage the exchange rate risk.

“It was the instrument we found to soften,” he continued, stressing that “this is not an intervention per se, nor is it any situation that could be perceived as panic.”

“What we are witnessing is a market correction in the face of the new balances imposed by this phenomenon of a sharp reduction in our exports in a relatively short period,” he stressed.

Lima Massano said that inflation is a matter of great concern for the BNA, “which is responsible for preserving the value of the currency and its purchasing power” and whose action is aimed at influencing price stability in the economy.

“Inflation is an evil; it generates poverty (…) We will continue to ensure price stability in the economy with the instruments we have at our disposal,” assured the head of the BNA.

This year, the “ambition” is to bring inflation to a range between nine and 11%, but the impact of the devaluation of the kwanza must be evaluated.

“We continue to work in this direction; we will now see what this impact of the sharpest variation in the price of the currency brings us, which turned out to be one of the reasons that led us at this time to keep monetary policy rates unchanged,” he concluded.

With information from Lusa

News Angola, English news Angola, Angolan economy

More: Angola news in English, every day from The Rio Times.

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error