Angola imposes stricter currency curbs to stem Kwanza decline
In an effort to prevent further depreciation of the kwanza, Angola's central bank is implementing stricter regulations on foreign-exchange trading. The country, as Africa's second-largest oil producer, is grappling with a shortage of US dollars.
Reports from Bloomberg indicate that commercial banks in Angola are facing restrictions on their ability to purchase dollars through electronic trading systems within a specified range. These restrictions have been tightening over recent weeks, according to anonymous sources who are not authorized to speak to the media.
In October, the World Bank labeled the kwanza as one of the "worst-performing currencies" in Africa for 2023, alongside the Nigerian naira, both having depreciated by nearly 40%. The Bank's Africa's Pulse report pointed out that the decision of the Central Bank of Nigeria (CBN) to remove trading restrictions on the official market weakened the naira. Furthermore, the report noted that the kwanza's decline was exacerbated because Angola's central bank ceased defending the currency.
Key Takeaways
African currencies have faced a significant depreciation against the US dollar this year, exacerbating inflation in a region heavily reliant on imports. Dwindling dollar reserves have left policymakers with limited tools to counter this decline. The surge in US interest rates, which is luring investors toward higher-yielding US assets, and subdued demand for African exports amid concerns of a global economic downturn, have collectively weighed down on African currencies. In the case of Angola, where over 90% of exports are oil-related, the country has been particularly affected. Crude oil exports in the first quarter of this year fell by approximately 30% year-on-year, largely due to the drop in global oil prices. Brent crude, which averaged $82.10 per barrel in the first quarter of 2023, was significantly lower than the $97.90 per barrel seen in the same period the previous year, further straining Angola's economic outlook.
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