Angola Cuts Benchmark Interest Rate to 19.50%


Angola Cuts Benchmark Interest Rate to 19.50%

Angola’s central bank monetary policy authority cuts the benchmark interest rate by 50 basis points to 19.50% in a decision announced on Monday.

The move comes after the southern African country’s inflation eased further to 19.78% on a year-on-year basis in August, down from 21.40% in July and 27.66% in January.

Last month the ruling People’s Movement for the Liberation of Angola (MPLA) was declared winner of a national election, handing President Joao Lourenco a second term. Lourenco has pledged to press on with economic reforms including privatising state assets.

Recently, Fitch ratings revises Angola outlook to positive, affirms the country’s rating at B-. It said higher oil prices and expectation of continued expenditure restraint will lead to an improvement in Angola’s fiscal outlook.

The central government cash balance shifted to a surplus of 5.3% of GDP in 2021 from a 1.1% deficit in 2020 due to a substantial increase in oil revenue, equivalent to 60% of government revenue including grants).

“Our Brent oil price assumptions imply the oil market backdrop should remain supportive for Angola’s public finances, which combined with stronger growth will lead to a fiscal surplus of 4.3% of GDP in 20222, Fitch said.

The rating note stated that the country’s fiscal balance figures for 2021 and 2022 are significantly above the historical ‘B’ median of -3.7% of GDP. READ:SSA: Nigeria, Angola Under Less Pressure – Report

“We expect the 2022 fiscal surplus to lead to a substantial improvement in the sovereign cash buffers, which should mitigate short-term refinancing risks”.

Fitch forecasts Angola’s central government debt to fall to 56.5% of GDP in 2022, a sharp decline from 79.7% in 2021 and 123.8% in 2020 and now close to the historical ‘B’ median of 52.2%.

“We expect this decline in the ratio to be driven by significant kwanza appreciation (with the earlier depreciation an important driver of rising debt in previous years, given foreign-currency denominated debt accounts for 70% of total public debt, substantially higher nominal GDP and continued commitment to fiscal consolidation”, the rating note stated.

# Angola Cuts Benchmark Interest Rate to 19.50%#
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