Angola's Currency: Tied To The Us Dollar?

Angola's currency, the kwanza, is not tied to the US dollar. However, the US dollar is widely accepted as a secondary currency in Angola. The kwanza was introduced following Angola's independence in 1977 and replaced the escudo at par. Since then, four different currencies using the name kwanza have circulated. The kwanza derives its name from the Kwanza River. As of April 27, 2024, 1 Angolan kwanza is equivalent to 0.001199 US dollars.

Angola's currency, the kwanza, is not pegged to the US dollar

The US dollar is widely accepted as a secondary currency in Angola. However, the kwanza is the only currency officially accepted in the country. Since July 2013, all companies operating in Angola have been required to use the local currency (kwanza) and local banks for all payments, including those to suppliers and contractors located outside the country. This law aims to strengthen demand for the kwanza and build up the capacity of Angola's financial sector.

The exchange rate between the kwanza and the US dollar has fluctuated over time. As of April 27, 2024, 1 AOA was equal to 0.001199 USD. The exchange rate has been volatile, with the kwanza losing about 35% of its value in 2015 and nearly 60% in the last 16 months. Angola's economy is heavily dependent on oil exports, and the decline in global oil prices has impacted the value of the kwanza.

The kwanza has suffered from high inflation and devaluation

The kwanza is the currency of Angola, deriving its name from the Kwanza River. Four different currencies using the name kwanza have circulated since 1977. The first kwanza, AOK, was introduced following Angolan independence and had a stable exchange rate of 29.918 kwanzas to the US dollar.

The novo kwanza, AON, was introduced in 1990 and replaced the kwanza at par. However, Angolans could only exchange 5% of their old notes for new ones, with the rest exchanged for government securities. This currency suffered from high inflation.

In 1995, the kwanza reajustado (plural kwanzas reajustados) replaced the previous kwanza at a rate of 1,000 to 1. Inflation continued, and the currency suffered from a lack of corresponding coins.

The second kwanza, AOA, was introduced in 1999 and replaced the kwanza reajustado at a rate of 1,000,000 to 1. Initially, this currency also suffered from high inflation, but its value became stable until 2016 when it started devaluing again. Between May and June 2023, the kwanza suffered a devaluation of nearly 40% against the US dollar, reaching a record low of 825 kwanzas to the US dollar.

The high inflation and devaluation of the kwanza have been linked to the Angolan economy's dependence on oil prices and production. The oil price slide that began in mid-2014 has substantially reduced Angola's fiscal revenue and export earnings, impacting the value of the kwanza. Additionally, the removal of government fuel subsidies and the scarcity of foreign exchange have contributed to the devaluation of the currency.

The Angolan government has implemented various measures to address the economic challenges, including economic diversification, infrastructure development, and encouraging small and medium enterprises. However, the kwanza continues to face high inflation and devaluation pressures, impacting the country's ability to attract foreign investment and conduct international trade.

Angola's real GDP (in US dollars) declined by 6.6% from 2015 to 2016

The devaluation of the kwanza also played a significant role in Angola's economic challenges. The local currency experienced a substantial drop in value, losing 35% of its worth in 2015 and nearly 60% by mid-2016. This devaluation contributed to an increase in inflation, which rose to 45% in 2016, up from 14.3% in 2015. Additionally, the scarcity of foreign exchange due to limited oil revenue further exacerbated the economic situation.

The non-oil sector in Angola contracted by 50% in 2016, as industrial production, construction, and services sectors faced shortages of imported inputs due to the limited availability of foreign exchange. The government has implemented measures to stimulate economic growth and reduce reliance on oil, such as prioritizing the development of agriculture, agro-industry, fisheries, and manufacturing. However, the effects of these strategies are expected to take several years to materialize.

Despite the economic challenges, Angola remains an upper-middle-income country with a GDP of $96.2 billion in 2016, ranking as the third-largest economy in Sub-Saharan Africa. The country's economic outlook for 2017 projected a growth of 1.3%, indicating a potential recovery from the previous year's stagnation.

Angola is a major oil-producing country and OPEC member

Angola is a major oil-producing country and was a member of the Organization of the Petroleum Exporting Countries (OPEC) from 2007 until its withdrawal on 1 January 2024. OPEC was founded in 1960 by Saudi Arabia, Kuwait, Venezuela, Iran, and Iraq, and Angola joined the group in 2007. Angola's oil production averages 1.1 million barrels per day, the second-highest volume in the Sub-Saharan region behind Nigeria.

Angola's oil output has been in decline since the mid-2014 oil price slide, which substantially reduced the country's fiscal revenue and export revenue and stagnated growth. In 2016, Angola's real GDP declined by 6.6% due to the decline in global oil prices and a significant devaluation of the local currency, the kwanza. In recent years, Angola has been unable to meet its OPEC+ output quota due to declining investment.

Angola's decision to leave OPEC was influenced by the organization's imposition of a much lower output limit, which hindered the country's plans to stabilize crude production above 1 million barrels per day. Angola's departure from OPEC reduces the organization's membership to 12 countries and further decreases OPEC's share of the world market.

Angola's currency controls require companies to use local banks and the kwanza for transactions

Angola's currency controls require companies operating in the country to use local banks and the kwanza for transactions. This has been the case since July 2013, when the Angolan government implemented a law requiring all companies to use the local currency and local banks for all payments, including those to suppliers and contractors located outside of Angola. The aim of this law is to strengthen demand for the kwanza and build up the capacity of Angola's financial sector.

The kwanza is the currency of Angola and has been since the country gained independence. Four different currencies using the name kwanza have circulated since 1977. The currency is named after the Kwanza River. The first kwanza, introduced in 1977, had a stable exchange rate of 29.918 kwanzas to the US dollar for its entire period of circulation. However, the kwanza introduced in 1999 suffered from high inflation and devalued by nearly 40% against the US dollar between May and June 2023, reaching a record low.

The controls on the movement of currency into and out of Angola have been tightened by the government. Since April 15, 2016, Angolan citizens have been permitted to carry up to $10,000 into or out of the country, while residents are subject to a $5,000 limitation. The limit on transit of local currency is 50,000 kwanzas, which is approximately $145. Officials regularly search departing passengers at Luanda airport and confiscate amounts over these limits.

The 2018 investment law grants foreign investors the right to transfer abroad dividends, profits, liquidation proceeds, capital gains, indemnities, royalties, and other income related to technology transfer. However, taxes on dividends start at 15% and can rise to 50% depending on the value and timing of repatriation.

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