Angola faces currency test in economy shake-up

But the path to transforming the oil-dependent country's economy will be long and difficult -- as was highlighted by anger over the de facto de-valuation of the local currency.

Angola faces currency test in economy shake-up

World Bulletin / News Desk

Angolan President Joao Lourenco was elected five months ago promising an "economic miracle".

Since January, new central bank governor Jose de Lima Massano has been presiding over something of a fiscal revolution, weaning the local kwanza currency off its artificial peg to the dollar, and phasing in a floating exchange rate.

The local unit has been fixed at a rate of 166 to the dollar since 2016, even if the kwanza has changed hands at a rate of more than 400 for a dollar on the black market.

"We have an exchange rate that doesn't reflect reality," Massano conceded.

Officials are treading cautiously with the reforms.

Before the currency is allowed to float completely freely by the end of 2018, the kwanza is now trading between two rates that authorities are for now keeping secret to avoid speculation.

The central bank chief justified the move by pointing to the urgent need to stem the "continuing decline of currency reserves".

In 2014, Angola -- which is Africa's second largest oil producer -- was badly hit by the plunge in the price of crude which is by far the country's largest source of income.

The decline threw the country into a prolonged crisis.

After many years of a centrally-controlled exchange rate, Angola came dangerously close to recession and saw its dollar reserves severely depleted by an unsuccessful effort to prop-up the kwanza.

Angola was thought to have had $20 billion in reserves at the start of 2017, which had slumped to $14 billion by November, according to analysts.

"If our foreign currency spending continues at this pace, we run the risk of seeing (reserves) halve between now and the end of the year," warned central bank chief Massano.

Such a dramatic evaporation of hard currency prompted the new government to take action.

Major global brands such as the Emirates airlines have recently begun to back off from Angola because of the currency crisis.

Güncelleme Tarihi: 28 Ocak 2018, 16:12