Angola Monetary Policy November 2019

Angola: Central Bank keeps key policy unchanged in November after floating the currency

At its 29 November meeting, the Monetary Policy Committee (MPC) of the National Bank of Angola (BNA) kept the key policy rate stable at 15.50%. Similarly, the BNA also maintained the interest rate for the permanent liquidity-absorption facility at 0.00% and kept the coefficients of mandatory reserves in local currency unchanged at 22.00% and for foreign currency at 15.00%. This was the third consecutive meeting in which the Bank decided to stay put and came on the heels of the Bank’s decision to float the currency in mid-October.

The Bank kept its monetary policy stance unchanged against the backdrop of broadly stable inflationary pressures. Inflation in the province of Lunda remained unchanged in October at September’s near four-year low of 16.5%. This was despite upward pressures stemming from the introduction of a value-added tax (VAT), as well as the kwanza slumping to an all-time low against the U.S. dollar in the second half of October after the BNA fully liberalized the foreign exchange regime.

In the accompanying statement, the Bank noted that it will continue to maintain a somewhat restrictive monetary policy stance in a bid to preserve the disinflation trend, despite upside pressures stemming from the liberalization of the exchange rate system. Meanwhile, in order to further liberalize the foreign exchange market, the Bank announced that it will allow direct sales of foreign currency between oil companies and commercial banks, and will also reduce banks’ foreign exchange position limit from 5.0% of its own funds to 2.5%.

Looking ahead, the Bank will likely hold off from easing monetary policy until risks to inflation subside. A period of uncertainty following the flotation of the kwanza and the NBA’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 January.

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