Angola Moves to Curb Foreign Currency Spending

Angola’s central bank has asked companies and citizens to cut foreign-exchange use by 50 percent amid a dollar shortage caused by dwindling revenue from oil and diamond exports.

Africa’s second-biggest oil producer “won’t have more foreign exchange available soon,” Bloomberg quoted the state-run broadcaster, Televisao Publica de Angola, to have reported yesterday,, citing central bank Governor Jose Pedro de Morais Junior. A spokesman for the central bank didn’t immediately respond to Bloomberg’s request for comment.

The kwanza has lost 19 per cent against the U.S. dollar this year even as the Banco Nacional de Angola rationed foreign-exchange supplies via weekly auctions, resulting in an order backlog of as much as $6.5 billion, according to Standard Bank Group Limited. Standard & Poor’s cut the southern African nation’s credit-rating outlook to negative on August 14, predicting the fiscal deficit will widen in the face of lower oil prices. “Depressed oil prices and slow progress on boosting diamond exports is undermining foreign-currency supply,” a Johannesburg-based analyst at Standard Bank, Samantha Singh said.

“It seems that the situation has, in fact, deteriorated over the past month. We expect further” kwanza weakness, she said.

The central bank had raised its benchmark interest rate three times since March to contain soaring prices. The rate was increased to 10.25 per cent on July 27, one month after it raised the cash reserve ratio for banks to 25 per cent. The nation’s foreign-exchange reserves fell by 21 per cent in the past year to $24.2 billion, according to data compiled by Bloomberg. Angola, Africa’s largest crude producer after Nigeria, relies on the fuel to generate about 70 per cent of taxes and 95 per cent of export income. As the price of oil plunged more than 50 per cent in the past 12 months, the government slashed this year’s budget by a quarter, cut fuel subsidies and froze hiring.

The inflation rate rose to 9.6 per cent in June from 8.9 percent the month before, according to the national statistics agency, and the central bank expects it to accelerate to 10.4 percent by the end of the year. S&P affirmed Angola’s B+ rating, four steps below investment grade.