Citi Research indicated that the fall in global oil prices in March 2020 has exacerbated the pressure on the Angolan kwanza, as reflected by a widening of the spread between the parallel and official exchange rates. It noted that the official exchange rate reached AOA580 per US dollar at the end of June 2020, while the kwanza was trading at AOA790 per dollar on the parallel market. It added that oil companies in Angola are selling US dollars directly to local banks at an exchange rate that ranges between the official and the parallel rates, which has created a multiple exchange rate regime. Further, it pointed out that the depreciation of the kwanza has had a twofold macroeconomic impact on the Angolan economy. First, it indicated that the weaker currency contributed to a surge in the inflation rate, which averaged around 19.3% so far in 2020. Second, it said that Angola's debt ratios increased significantly, given that a considerable portion of the debt stock is denominated in US dollars. It added that the high debt servicing costs have raised the possibility of a sovereign debt default. In addition, it considered that there is very little that the Banco Nacional de Angola (BNA) can do to limit the depreciation of the kwanza given its low level of foreign currency reserves and the low oil price environment, and if external debt servicing obligations continue to be high. Still, it pointed out that the BNA has recently announced that it would possibly tighten its monetary policy to prevent the currency from reaching AOA1,000 per dollar by end-2020.
Source: Citi Research