Angola is facing a shortage of U.S. dollars as oil revenues continue to drop and foreign banks cut supply of the greenback to local banks.
For a country that depends highly on imports, the situation is taking its toll on a population, where poverty is still prevalent despite the country’s vast oil reserves.
“Business is not going well. The economy is down. Customers don’t buy nowadays, they don’t want to spend. We buy boxes of mangoes for 3,500 Kwanzas. Eventually we make only 300 Kwanzas. It is very difficult for us.” Said Laurena Senha, a fruit trader
In the first quarter we sold 45 percent fewer US dollar bills, compared to the same period in 2014. There was a substantial reduction in the circulation of US dollar bills in our market. That is also due to the fall in oil prices.
Laureana Senha used to sell fruit from Namibia at a busy market in downtown Luanda, Angola’s capital. Now she can’t afford to travel because money is scarce and to make up she tries to sell more expensive locally grown fruits, but the buyers are having a hard time of their own and can’t afford.
Angola’s central bank has restricted dollar sales as foreign exchange supplies dry up due to a fall in global oil prices this year.
The kwanza has declined sharply as a result ramping up costs in a country that relies on imports for 80 percent of consumer goods. The kwanza is trading at 170 against the dollar on the street, compared with 109 officially.
“We couldn’t just stop abruptly. We were decreasing our acquisitions abroad. In the first quarter we sold 45 percent fewer US dollar bills, compared to the same period in 2014. There was a substantial reduction in the circulation of US dollar bills in our market. That is also due to the fall in oil prices. Therefore, we are increasingly unable to avail dollars to our customers.” Amilcar Silva, President of Angola’s Commercial Bank Association (ABANC)
Oil accounts for around half of the country’s GDP, 80 percent of tax revenues and 90 percent of export earnings. Angola’s kwanza has weakened around 30 percent officially this year and far more on the parallel market.
Angolan President Eduardo Dos Santos told Angolans last year that 2015 would be “difficult economically” with some public spending cuts, including on fuel subsidies and infrastructure. Much-needed efforts to diversify Angola’s economy are also set to be undermined as public spending is slashed.
However, the governor of Angola’s National Reserve Bank, José Pedro de Morais has reaffirmed there was no dollar crisis in the economy, but a deficit in the country’s balance of payments.