Angola should let the currency float, say IMF officials visiting the country

2023-11-01 00:56:03

Angola should let its currency float, International Monetary Fund officials said on Tuesday, during a visit to the country, where authorities kept the kwanza in a tight range for months.

The government let the kwanza fall by more than a third in May and June, with analysts associating the change with the reduction in oil revenues and a resumption of external debt payments, making it more difficult for the country to sustain the currency.

But since the beginning of July, the kwanza has been trading in a tight range around 830 against the US dollar. Bloomberg News reported last week that the central bank had tightened restrictions on foreign currency trading to prevent the kwanza from further weakening.

“Our recommendation is that the country follows the floating exchange rate. This is extremely important for Angola, since the floating rate works as a buffer for relevant external events”, said the IMF resident representative in Angola, Victor Lledo, at a press conference in the capital Luanda.

“There are persistent exchange rate pressures, which are related to fundamentals. … Countries should allow the exchange rate to adjust and depreciate,” said Catherine Pattillo, deputy director of the IMF’s Africa department.

Angola’s inflation slowed sharply in 2022 and throughout the first half of the year, but following the depreciation of the kwanza between May and June, it increased again.

The Bank of Angola lowered its main interest rate in March, but has kept it unchanged at the three meetings since then. The next review of its monetary policy is scheduled for next month.