Angola’s central bank is prepared to cut interest rates further this year as inflation cools in the oil-producing African nation.
(Bloomberg) — Angola’s central bank is prepared to cut interest rates further this year as inflation cools in the oil-producing African nation.
The Banco Nacional de Angola reduced the benchmark rate to 17% from 18% in March, the second drop in 2023. Lowering borrowing costs makes Angola an outlier in Africa — it’s one of only two countries on the continent to reduce rates this year as countries from Nigeria to Morocco and Kenya battle to rein in inflation.
“We have room to keep on reducing interest rates without creating any situation where the inflation target will be missed,” Governor Jose de Lima Massano said in an interview Thursday in Washington, where he’s attending the International Monetary Fund’s Spring Meetings. If inflation slows further, “we will probably be ending the year with the basic interest rate around 15%,” he said.
Annual inflation in Angola, one of Africa’s top crude producers, eased for the 14th consecutive month in March to 10.8%. The central bank forecasts annual price-growth at 9% to 11% in December.
Massano said upside risks may come from a government plan to reduce or end fuel subsidies this year, climate change that’s affecting local food production — a key component in Angola’s consumer price index — and volatility in oil markets.
Higher crude prices have helped bolster Angolan exports and stabilize the value of the kwanza against the dollar, aiding the central bank’s efforts to reduce inflation.
“Oil prices are always critical,” said Massano, adding that Angola depends on oil for about 95% of its exports.
“We are also eager to see exactly what’s going to happen with fuel prices” once the subsidies are removed, he said. “I would say those are the critical issues at this point for us.”
Angolan Finance Minister Vera Daves de Sousa said in a separate interview in Washington that the country is pushing ahead with a plan to diversify the economy away from oil and reduce its reliance on imports as a way to contain inflation. Angola was a major food exporter in Africa before a 1975-2002 civil war. In 2021, agriculture, forestry and fishing accounted for just 7.9% of gross domestic product, according to World Bank data.
“We’re working hard to diversify,” Daves de Sousa said. “We’re still importing a lot and sometimes we also import inflation with these products.”
The government is seeking to attract foreign direct investment through the sale of stakes in dozens of state-owned companies through 2026, including in oil group Sonangol and diamonds firm Endiama, she said, without giving details.
“We already privatized 92 assets and we want to privatize 73 more,” Daves de Sousa said. “So we have lots of opportunities.”
(Updates with comments from Angolan finance minister in final four paragraphs)
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