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Angola’s national currency, the kwanza, has gained 23% against the US dollar this year, with one dollar worth 554.9 kwanzas on 1 January improving to 449.8 at the end of March.
According to Lusa’s analysis of the official exchange rates of the kwanza, Angola’s national currency has appreciated consistently since the beginning of the year, driven by the rise in oil prices and causing several positive implications for Angola’s economic indicators.
For the governor of the National Bank of Angola, the current value at around 450 kwanzas per dollar is balanced: “We have been seeing an increase in confidence in the currency, generating considerable gains for the kwanza,” said José Lima Massano, speaking to the Bloomberg financial information agency in mid-March.
“The balance of the kwanza has been restored,” the governor said, referring to the difference between the kwanza’s value on the formal and informal markets, with differences of up to 150%, but which have now been practically eliminated.
The kwanza is gaining value due to the improved forecast for the evolution of Angola’s economy, the second-largest oil producer in sub-Saharan Africa, and the partial liberalisation of the exchange rate, the governor said, referring to the measure taken in 2018 and which, in practice, de-indexed the kwanza to the dollar, which caused a depreciation of “over 80%” in the following years.
The measure, Massano said, was necessary to eliminate “major dysfunctionalities and imbalances in the Angolan foreign exchange market” but had the effect of losing purchasing power and increasing the public debt to GDP ratio, as a good portion of Angola’s debt was issued in dollars.
Besides the strengthening of the kwanza against the dollar over the last few quarters and the rise in tax revenues due to the increase in oil prices, “consumers are also benefiting from the government’s decision, in October 2021, to cut the VAT rate on essential goods from 14% to 7%,” said Oxford Economics Africa analysts in a recent note on the evolution of Angola’s currency.
Angola’s economy came out of a five-year recession in 2021, growing 0.7%, according to the Angolan National Institute of Statistics, and is expected to grow 3% this year, according to the International Monetary Fund (IMF) forecast.
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