Angola’s central bank governor forecasts FX stability amid inflation concerns

WASHINGTON, April 20 (Reuters) – Angola’s central bank
sees relative stability for the country’s kwanza currency this
year, Governor Manuel Tiago Dias said on Saturday, cautioning
that the bank’s inflation forecast could be raised due to
changes in fuel price subsidies.

Speaking in an interview with Reuters on the sidelines of
the International Monetary Fund and World Bank spring meetings,
Dias confirmed he expected consumer price inflation to stand at
19% by year-end, down from 20% in 2023 and from 26.09% in March
.

“These forecasts could be altered, especially if there are
any changes to fuel price subsidies, and the impact of that
would then be higher inflation than what we currently
anticipate,” he said.

Squeezed by surging debt costs and high pump prices,
governments across Africa have been trying to scrap costly fuel
benefits but this has proved unpopular and sparked protests in
countries from Angola to Senegal and Nigeria in recent years.

Oil-producing Angola spent 1.9 trillion kwanza ($2.3
billion) subsidising fuel in 2022, more than 40% of what the IMF
estimated it spent on social programmes.

After the kwanza fell about 40% against the dollar
last year, the central bank governor has greater confidence that
current market conditions would allow for stability.

“Based on the information available at the moment, we will
continue to have relative stability in the exchange rate,” he
said, adding he had reiterated Angola’s commitment to a flexible
exchange rate regime to both the IMF and investors during the
spring meetings.

Regarding the next monetary policy steps, Dias said he was
keeping an eye on the evolution of the global economy – for
which he sees no major changes amid the maintenance of global
interest rates at relatively high levels – and domestic
indicators.

Persistent high oil prices would also sustain high export
revenues in the second quarter, he said.

“Looking to the next quarter, our perspective is that the
currency supply in the foreign exchange market will remain
around $600 million monthly,” he said.

“If there is any specific government intervention, this
supply level could increase, and naturally, the stability of the
exchange rate could also contribute to a potential inflation
slowdown.”

The Bank of Angola’s next monetary policy meeting is
scheduled for May, following a 100 basis-point rate increase in
March, which brought its main interest rate to 19%.

($1 = 832.8230 kwanzas)
(Reporting by Marcela Ayres; Editing by Andrea Ricci)