Angola’s central bank Raises Basic Interest Rate by 2% in March

Luanda, Angola, Capital Markets in Africa —  National Bank of Angola (BNA, Banco Nacional de Angola) Monetary Policy Committee (CPM) held a meeting on 28 March 2016, decided to increase the Basic Interest Rate to by 200 basis points to 14.oo percent, to manage inflation rate and strength the currency, BNA said in a statement on its website on Tuesday.

In addition, the central bank raised the standing lending facility rate to 16 percent from 14 percent, while the overnight standing liquidity absorption facility rate rose to 2.25 percent from 1.75 percent.

Angola’s inflation rate accelerated to 20.26 percent in February from 17.34 percent in January, with food and alcoholic drinks, housing electricity and fuels, and miscellaneous goods and services contributing most to inflation by rising 1.69 percent, 0.31 percent and 0.22 percentage points, respectively. In addition to higher import prices from a falling currency, prices have also been boosted by government cuts to petrol subsidies at the start of the year.

Furthermore, Angola’s kwanza has been hit hard by the fall in crude oil prices since the middle of 2014 and the central bank has devalued the kwanza several times. Angola is Africa’s second largest crude oil producer and sub-Saharan Africa’s third-biggest economy has relied on revenue from oil exports for almost all its foreign exchange earnings.

National Bank of Angola predicted economic growth of 3.3 percent in 2016, down from 4.9 percent in 2015 and the lowest level since 2009, as the fall in oil prices cuts into exports and government revenue.

The benchmark rate has now increased by 300 basis points this year, following a 100 basis points hike in February MPC’s meeting. This has resulted  to about 525 basis points increased since October 2014, when the BNA embarked on tightening monetary policy.

On March 5th, Angola’s president appointed Valter Felipe da Silva as new governor of the central bank as part of a cabinet reshuffle. Da Silva replaced Jose Pedro de Morais who resigned after 14 months as governor.