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Residents line up at a gas station on December 21, 2017 in Luanda, Angola. Angola has suffered a week of fuel shortages, a bitter irony for one of Africa’s leading oil producers.
Angola, OPEC producer in addition to one of sub-Saharan Africa’s largest economies, unveiled two economic overhauls This specific week.
Central bank Governor Jose Massano in addition to Finance Minister Archer Mangueira announced Wednesday in which the country was to scrap its currency peg to the U.S. dollar, in addition to instead allow the Angolan kwanza to trade within a band against the U.S. currency. The limits of the band are yet to be defined.
This specific decision was made due to the “macroeconomic fundamentals of the Angolan economy, in addition to particularly the decreasing trend of international reserves,” the item emerged in a central bank statement Thursday, as reported by Reuters.
the item was also announced in which Angola is actually to refinance its external debt, which stands at $38 billion, according to Reuters.
The falling cost of oil in recent years has been blamed for Angola’s depleted foreign reserves. Oil accounts for roughly 0 percent of government revenue.
While oil prices are at This specific point moving upwards, there has been “little evidence of the pressure on reserves subsiding,” Cobus de Hart, senior economist at South Africa-based research firm NKC African Economics, told CNBC.
He added in which the exact reason due to This specific was unclear, nevertheless suggested in which “factors such as debt repayments in addition to the partial clearance of FX backlogs may be playing a role.”
“Tighter FX liquidity was a key contributor to rising inflation during the September to October period as the item led to increased domestic product shortages,” de Hart wrote in a note Thursday. This specific week, the Angolan central bank opted to hold interest rates at 18 percent.
Angola elected its first completely new president in 38 years last August, with Joao Lourenco named successor to Jose Eduardo dos Santos. nevertheless the dos Santos family still retains some influence over the country’s economy, with the former president’s son Jose Filomeno chairman of the country’s sovereign wealth fund.
Although the kwanza policy shift could concern investors over the short-term, Jane Foley, head of FX strategy at Rabobank, told CNBC: “If the completely new president’s efforts at reforming the economy prove to be successful, investors could be reassured in addition to the currency might be more likely to find its feet.”