Angola Monetary Policy January 2020

Angola: Central Bank stands pat in January

At its 27 January meeting, the Monetary Policy Committee (MPC) of the National Bank of Angola (BNA) kept the key policy rate unchanged at 15.50%. Similarly, the BNA also maintained the interest rate for the overnight and seven-day liquidity-absorption facility at 0.00% and 10.00% respectively, while keeping the coefficients of mandatory reserves in local currency unchanged at 22.00% and for foreign currency at 15.00%. This was the fourth consecutive meeting at which the Bank kept its monetary policy stance unchanged.

The decision to hold came against the backdrop of slowly intensifying inflationary pressures and contracting economic activity. Inflation in the province of Luanda jumped to a four-month high of 17.1% in December (November: 16.6%), fueled by the recently introduced value-added tax (VAT) and a markedly weaker kwanza, after the Bank relaxed tight currency controls in October 2019.

In the accompanying statement, the Bank noted that it will continue to maintain a somewhat restrictive monetary policy stance in a bid to “maintain the course of price stability in the economy and support the adopted exchange rate regime”. This provided an insight into why rates remained unchanged despite the worsening economic backdrop: GDP contracted at the sharpest pace in a year in Q3 2019, chiefly due to tumbling oil production.

Looking ahead, the Bank is expected to maintain a tight monetary policy stance its monetary policy stance until risks to inflation subside. The volatile kwanza and the BNA’s commitment to prudent monetary policy, which is reinforced by the country’s financing deal with the IMF, leaves the Bank with little space to maneuver in the near-term.

The next Monetary Policy Committee meeting is scheduled for 27 March.

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