Angola: Angolan kwanza falls to new record low in August
August 18, 2015
In August, the Angolan kwanza (AOA) lost ground against the U.S dollar, thus continuing a trend that began in mid-2014. The currency reached an all-time low on 11 August when it traded at 126.4 AOA per USD. The figure was 2.3% weaker than on the same day in the previous month and 29.1% weaker on an annual basis. The kwanza has lost 22.9% of its value since the beginning of the year. The fragile currency underlines the economic difficulties that the country faces amid depressed oil prices and strapped government finances.
The recent depreciation of the kwanza comes after the Chinese yuan depreciated significantly against the U.S dollar on 11 August. China’s demand for Angolan oil has fueled a steep increase in the country’s trade in recent years, helping Angola boost its economy but also leaving the country considerably vulnerable to policy shifts in Beijing.
On 27 July, the Central Bank of Angola hiked its monetary policy rate for a third time this year to contain soaring inflation. Angola is facing a foreign exchange shortage as low oil prices coupled with diminishing demand from China have slashed revenues from crude oil, which account for more than one third of the country’s exports and government’s earnings. Against this backdrop, earlier this month, the Central Bank has asked companies and citizens to cut foreign-exchange use significantly.
Author: Dirina Mançellari, Senior Economist