Angola‘s central bank will probably have to devalue the kwanza and raise interest rates this year as a sharp drop in oil prices saps foreign exchange supply, the Angolan unit of Africa-focused investment bank Imara said on Monday.
Oil-dependent Angola slashed $17 billion off its budget this year due to the drop in the price of oil, which accounts for around half of the southern African country’s gross domestic product and 90 percent of its export revenues.
As oil prices fell 60 percent between June 2014 and January this year, foreign exchange supplies have dried up, helping to push the kwanza to record lows against the U.S. dollar several times this year.
The kwanza, which is controlled by the central bank, has weakened by around 8 percent in the last six months, but Imara expects a one-off devaluation soon of around 20 percent.
“Foreign exchange supply has been tight and that has increased speculation,” Imara Securities’ Angola managing director Anthony Lopes Pinto told the Reuters Africa Investment Summit.
“I think a devaluation of around 20 percent has to happen at some stage,” said Lopes Pinto, adding that the kwanza was trading at a 20-40 percent discount on the black market.
Imara Holdings is listed in Botswana and has assets under management of around $1.8 billion.
Angola is Africa’s biggest oil producer after Nigeria but is a far more closed economy than Nigeria, making it more susceptible to oil shocks than Nigeria.
Source: Business & Financial News, Breaking US & International News | Reuters.com.
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