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Angola: Kwanza weakens, inflation accelerates

Staff Writer |
The Angolan kwanza weakened further in recent weeks as the Central Bank (Banco Nacional De Angola, BNA) continued to pursue its controlled adjustment of the exchange rate with the aim of gradually eliminating the gap between the official exchange rate and the black-market rate.

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To mitigate risk of substantial depreciation, the Bank has de facto capped the maximum depreciation of the exchange rate against the euro at 2.0% per auction.

During its latest auction held on 12 October, the National Bank of Angola provided commercial banks with EUR 15.5 million with a weighted average exchange rate of AOA 349.2 per EUR in the auction.

On 12 October the currency traded at AOA 304.7 per USD. The currency was down 6.5% in month-of-month terms and it lost nearly half of its value in year-to-date and in year-on-year terms. As a result, the difference between the official and black-market exchange rates has diminished further: At the beginning of October the kwanza traded at AOA 360 per USD in the parallel market, according to local media reports.

The determination to move to a fully free-floating exchange rate regime has gained further credibility following the government’s decision in August to seek financial support from the IMF in exchange for commitment to structural reforms.

FocusEconomics panelists expect the Angolan kwanza to end 2019 at 323.0 per USD and 2020 at 345.0 per USD.

Consumer prices in the province of Luanda soared 5.0% in September from the previous month, well above the 1.2% increase recorded in August. According to the Statistical Institute (Instituto Nacional de Estadística), the category of housing, water, electricity and fuel posted the largest price increase by far.

Meanwhile, inflation in the province of Luanda came in at 21.8% in the month, above August’s over two-and-a-half year low of 19.0%. In contrast, annual average inflation fell to an over two-year low of 23.0% in September, from 23.5% in August.

FocusEconomics Consensus Forecast panelists see inflation moderating gradually going forward and expect it to average 18.2% in 2019, which is down 0.7 percentage points from last month’s forecast, and 15.4% in 2020.

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