Southern African major oil producer Angola has signalled its intentions to devalue its currency the Kwacha exchange rate against the dollar. Devaluation is the change in value of a country’s currency from the previous value set. The country’s central bank governor disclosed this during an interview session with reporters.
The Kwacha is currently pegged at 166 to the dollar, but trades at 400 on the black market. Angola, like most petro economies was been hard hit by the fall in crude oil prices.
The country plans to renegotiate interest and capital repayments on its debt, which has an estimated size of $38 billion. Doing so, free up funds that can be spent on critical areas of the economy.
Possible reasons behind these moves
Angola’s newly sworn President Joao Lourenco may be using the opportunity of his honeymoon period to take all the hard decisions necessary for the growth of the economy. A new administration can easily take hard decisions when it still has a high approval rating. Embracing free market policies also encourages an influx of investors into the country
Nigeria clings to the past
Nigeria’s Central Bank rather than embrace a managed float of the Naira, opted to wait till the foreign exchange rates nearly hit N500 to a dollar, and industries struggling to access foreign exchange. The country has ramped up its debt drive, with a large proportion of it going to recurrent expenditure.
The government has also opted to subsidize petrol through the Nigerian National Petroleum Corporation (NNPC) rather than adopt market driven prices. An price modulation system earlier introduced seems to exist on only paper.
Angola ( officially the Republic of Angola) is the seventh-largest country in Africa. It is bordered by Namibia to the south, the Democratic Republic of the Congo to the north, Zambia to the east, and the Atlantic Ocean to the west. Angola’s immediate President Jose dos Santos handed over power after spending 38 years in power.