Angola to partially float currency as reform effort takes hold

Angola to partially float currency as reform effort takes hold

The first auction of the kwanza will be held today, days after authorities announced that Angola would abandon a US dollar peg. The kwanza is expected to depreciate by 20% to 30% but will be contained within an undefined trading band by the central bank. Hit by lower oil prices, Angola’s economy has almost flat-lined

General Views And Economy In Angola’s Capital City

Photo: Simon Dawson/Bloomberg

The first auction of the kwanza will be held today, days after authorities announced that Angola would abandon a US dollar peg. The kwanza is expected to depreciate by 20% to 30% but will be contained within an undefined trading band by the central bank. Hit by lower oil prices, Angola’s economy has almost flat-lined in recent years. While growth is expected to rebound to 2.2% in 2018, structural reforms would attract foreign investment and boost private sector activity.

A partial float of the currency is one such reform. The government’s efforts to keep the kwanza’s US dollar peg have cost it a fifth of its foreign-exchange reserves over the past year, with resultant shortages hurting the private sector.

Today’s currency sale a sign that things are moving fast in Angola, which experienced its first power transition in 38 years last August. Newly installed President Joao Lourenco Lourenco has vowed to fight corruption, dismantle monopolies and open up Sub-Saharan Africa’s third-largest economy.

While welcomed by investors, dismantling monopolies would put the new president in conflict with his former boss, long-time leader Jose Eduardo Dos Santos, whose family and cronies control much of the economy. One future trigger point could be the all-important oil industry, which provides three quarters of government revenue and 90% of exports but is dominated by Dos Santos’ daughter.

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