Friday, September 21, 2018

Angola maintains rate as inflation falls 10th month in row

     Angola's central bank left its benchmark BNA rate at 16.50 percent, citing the 10th consecutive month of declining inflation and a 2.45 percent year-on-year contraction in the monetary base, the operational variable of the bank's monetary policy since November last year.
      In July the National Bank of Angola (BNA) lowered its BNA rate by 150 basis points and cut the mandatory reserve ratio for kwanza deposits on expectations that inflation this year would be lower than the 23 percent earlier forecast.
     The July easing followed the bank's decision in May to unify the rate on its marginal lending facility with that of its basic interest rate, part of the major overhaul of BNA's operations since Jose Massano took over as governor in October last year.
      Angola's inflation rate has been decelerating sharply since hitting 41.12 percent in December 2016 and fell to 18.56 percent in August from 19.01 percent in July, the lowest since February 2016.
      Angola's international gross reserves dropped to US$17.18 billion in August from $18.54 billion in July and $18.06 billion in December but still cover 7.1 months of imports of goods and services.
      Credit issued by banks to the economy rose by 1.57 percent in the month of August for an annual rise of around 2.81 percent, BNA said.
      Under Massano the BNA in January replaced its fixed exchange rate regime that was in place since April 2016 with a floating regime with bands and began auctions to set a reference rate for the kwanza, which quickly fell and has continued to depreciate steadily since then.
      Today the kwanza was trading at 289.15 to the U.S. dollar, down some 43 percent since Jan. 4 when the exchange rate was floated. Currency auctions began on Jan. 9.
       The latest change in BNA's operations will take place on Oct. 1 when the central bank will cease selling foreign currency directly to commercial banks as there is a now a regular supply of foreign currency and the legal framework has been strengthened.
      Angola suffered a shortage of foreign currency following the plunge in crude oil prices in 2014
      During the period under review, the BNA said it sold a total of US$1.42 billion to commercial banks for cumulative sales this year of $9.48 billion, down 6.50 percent from the amount sold in the same period last year.


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