Angola’s central bank has room to lower interest rates to spur investment as inflation eases in Africa’s second largest oil producer, Governor Jose de Lima Massano said.
Policy makers have kept the benchmark interest rate unchanged at 9.25 percent since lowering it by half a percentage point in November. Inflation slowed to 7.32 percent in March from 7.48 percent in the previous month.
“There is room for interest rates to come down but we want to make sure we’re not putting unnecessary pressure on prices,” Massano, 44, said in an interview yesterday in his office in the capital, Luanda. “Stable inflation creates conditions for more credit to the economy at lower costs.”
Angola is stabilizing its economy to help draw investment and reduce its reliance on oil, which accounts for about 45 percent of gross domestic product and 80 percent of government tax revenue.
Banco Nacional de Angola has achieved this year’s inflation target of 7 percent to 9 percent, Massano said.
“If inflation keeps falling it’s expected that the central bank can decide to lower interest rates,” he said. “If we feel there’s room we’ll do it.”
The government expects the $122 billion economy, sub-Saharan Africa’s largest after Nigeria and South Africa, to grow between 5 percent and 7 percent this year, boosted by a 9 percent expansion of non-oil industries, the governor said.
A foreign exchange law enacted in 2012 requiring oil companies to pay domestic taxes and settle bills in kwanzas has supported the local currency and reduced central bank interventions in markets, the governor said. The kwanza has fallen 0.3 percent against the dollar this year, and traded unchanged at 97.92 by 10:07 a.m. in the capital, Luanda.
“De-dollarization gives more space for proper monetary policy so we have the right instruments to fight inflation,” he said. “If the kwanza gets stronger, that’s a bonus.”
To contact the reporter on this story: Colin McClelland in Luanda at email@example.com
To contact the editors responsible for this story: Antony Sguazzin at firstname.lastname@example.org Sarah McGregor, Karl Maier