ANGOLA, JANUARY 10, 2018 – Angola’s kwanza weakened in the first currency auction since the central bank removed its peg in a bid to staunch the drain on the oil-producing country’s foreign reserves.
The Banco Nacional de Angola sold 83.65 million euros ($100 million) to commercial banks at an average rate of 221.26 kwanza per euro in the first sale since saying last week that it would shift from a dollar peg to a trading band to determine the value of the kwanza against other currencies, according to the central bank’s website.
The central bank had maintained a peg of 166 per dollar, or 183.6 per euro, since April 2016.
The bank also published the exchange rate of the kwanza against other currencies, including the British pound and the Swiss franc. It said 50 percent of the foreign currency sold at Tuesday’s auction was to purchase primary materials, parts and equipment while the remainder would go to other sectors including farming, fishing, school and office materials.
Angola, Africa’s second-biggest oil producer, has joined a long list of commodity exporters — from Russia to Egypt, Kazakhstan, Nigeria and Uzbekistan — that have floated or devalued currencies in a bid to end crippling shortages of foreign exchange and revive economic growth. Reserves dipped to $14.2 billion in November from $15.4 billion in October, and are down from $20 billion at the start of 2017, according to the central bank.
The move is part of President Joao Lourenco’s effort to attract investment and bolster economic growth just three months after replacing Jose Eduardo dos Santos in the nation’s highest office. The former defense minister inherited an economy that has been crippled by the fall in oil prices — Angola’s main export — and widespread corruption.