Angola: Angolan kwanza falls to new record low in September
September 15, 2015
In September, 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 10 September when it traded at 127.0 AOA per USD. The figure was 0.9% weaker than on the same day in the previous month and 30.0% weaker on an annual basis. The kwanza has lost 23.5% 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 right after the Central Bank’s decision to devalue the currency in the interbank market earlier this month. The move marks the third devaluation of the currency in three months and reflects growing pressure on the government’s revenues amid lower oil prices. Adding to that, the depreciation of the Chinese yuan on 11 August has put further pressure on the currency. China’s demand for Angolan oil has fueled a steep increase in the country’s trade in recent years, helping Angola to boost its economy but also leaving the country considerably vulnerable to policy shifts in Beijing.
On 28 August, the Central Bank of Angola hiked its monetary policy rate for a fourth 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, last month, the Central Bank has asked companies and citizens to cut foreign exchange use significantly.
Author: Dirina Mançellari, Senior Economist