"At Fitch Solutions, we anticipate that Angola's kwanza will depreciate even more, to 680 kwanzas per dollar at the end of this year, with the drop in oil exports reducing the demand for the currency," reads an analysis of Angolan monetary policy.
In the document, sent to investors and to which Lusa had access, the analysts of this consultancy, owned by the same owners of the financial rating agency Fitch Ratings, write that the depreciation will slow down in coming quarters, reaching the end of 2021 with a dollar worth 695 kwanzas.
"Although a slight increase in exports and global risk appetite will ease pressures on the kwanza, investor fears about the fragile financial position and unattractive real rates will keep the currency on a downward trajectory," write the analysts.
Since the beginning of the year, the kwanza has lost more than a quarter of its value against the dollar and is expected to continue to break against the US currency in 2021.
"We believe that two factors will cause the kwanza to continue to lose value in the long term; first, the covid-19 pandemic has exacerbated budgetary pressures, with the government being forced to negotiate up to $6.2 billion in debt relief from official creditors," the analysts point out.
Public debt, they estimate, is expected to rise from 100.7 percent in 2019 to 116.4 percent this year, "which will likely keep investors concerned about the country's fragile fiscal position in coming quarters.
Second, they conclude, inflation is expected to slow moderately from this year's average of 21.9 percent, but should remain high at 18 percent in 2021.
"This will continue to undo the differential in real rates with the United States, particularly because we expect a 50 basis point cut in the National Bank of Angola's monetary policy in 2021, which will ensure that the kwanza depreciates further," the analysts conclude.
In the most recent forecasts on the evolution of African economies, the International Monetary Fund (IMF) predicted that Angola faces a 4 percent recession this year, recovering to 3.2 percent growth in 2021, and predicting that public debt will stand at 120.3 percent this year, slowing to 107.5 percent of GDP next year.
