Angolan Central Bank Governor Sees Room to Cut Lending Rates

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.

Currency Support

A foreign-exchange law enacted in 2012 requiring oil companies to pay domestic taxes and settle bills in kwanzas has supported the domestic currency and reduced central bank interventions in markets, the governor said. The kwanza is trading little changed against the dollar this year. It gained 0.3 percent to 97.64 by 1:30 p.m. in Luanda.

“De-dollarization gives more space for proper monetary policy so we have the right instruments to fight inflation,” Massano said. “If the kwanza gets stronger, that’s a bonus.”

The Capital Markets Commission is on track to start a bond market this year that would help investors develop private industry, he said.

Foreign banks mainly from Europe have expressed interest in setting up operations in Angola, probably attracted by their familiarity with regulations modeled on those in Portugal, Angola’s former colonial ruler, Massano said. There are no immediate plans to increase the number of licensed lenders from about 24, while mergers may increase as the financial system becomes more complex, he said.

The government will begin debating in July a deposit-insurance plan for commercial lenders to be submitted by central bank staff, Massano said. He declined to provide more details because the amount of coverage is still being discussed.

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