The governor of the National Bank of Angola (BNA) said today that there was no reason to panic about the devaluation of the kwanza, speaking of a “market correction,” which the regulator wanted to “smooth out” by placing Treasury bonds on the market.
José de Lima Massano, who was speaking in Bié, after the 111th meeting of the Monetary Policy Committee, noted that oil and gas generated about 95 percent of foreign exchange resources for Angola, and thus any change in the quantities produced or prices on international markets had an impact on the economy.
“And in the first four months of the year what we observed was a drop in export revenues,” he stressed, indicating that this had reflections on the supply of foreign exchange that were also visible on the Bloomberg FXGO platform, available for foreign currency trading between major exporters and buyers.
“[Over the last two months] we have seen a drop of 40 percent on that foreign exchange resources platform and we have seen a number of pending operations, which we had already overcome,” he said.
He said that they had started to receive complaints about operations that were not occurring within the due deadlines.
“The instrument we have for correcting supply and demand is the price and what we are seeing is this new adjustment, determined by market forces, which is putting pressure on the national currency,” he said, indicating that since January the kwanza had depreciated 7 percent against the dollar.
The governor noted that the BNA has responsibilities for price stability in the economy, stressing that the exchange rate was a very important factor for price formation, but that it was also responsible for maintaining international reserves, which should be kept at the minimum level of six months of imports, where they currently are.
On the other hand, he noted that the BNA acts whenever there are distortions in the market, especially when they can be understood as transitory.
“At the moment, we have no indication that the reduction observed in the supply of foreign exchange over the last two months is something temporary, hence if we had to intervene to maintain the exchange rate the international reserves would have already fallen by about $1 billion, an exercise that would cause further damage to the economy,” he explained, speaking of market adjustments
“The market has been adjusting, but we understand that this adjustment also causes risks and, therefore, we decided to make securities held by the BNA in foreign currency available to economic operators and citizens, investing in national currency,” he noted.
The governor said that, in this way, there are conditions to preserve savings and manage the exchange rate risk.
“It was the instrument we found to soften,” he continued, stressing that “this is not an intervention per se, nor any situation that could be perceived as panic.”
“What we are seeing is a market correction in the face of the new balances that are imposed by this phenomenon of a sharp reduction in our exports in a relatively short period,” he stressed.
Massano said that inflation was a matter of great concern for the BNA, “which is responsible for preserving the value of the currency and its purchasing power,” and whose actions are aimed at influencing price stability in the economy.
“Inflation is an evil, it generates poverty (…) We will continue to ensure price stability in the economy with the instruments we have at our disposal,” the BNA official said.
This year, the “ambition” is to bring inflation to a range between 9 and 11 percent, but the impact of the devaluation of the kwanza needs to be assessed.
“We continue to work in that direction, we will now see what this impact of the sharpest variation in the price of the currency brings us, which turned out to be one of the reasons that leads us at this time to keep monetary policy rates unchanged,” he concluded.