Angola inflation hits four-month high as Kwanza weakens
Angola’s inflation rate climbed to a four-month high in June after a government decision to stop defending the kwanza and cut gasoline subsidies.
The annual inflation rate in Africa’s third-biggest oil producer rose to 11.25% in June from 10.6% in the previous month, data published on the National Statistics Institute’s website showed. That’s the second consecutive increase after 15 months of declines.
Contributing to the increase were higher costs of food and transport, according to the statistics institute.
Angola’s treasury abstained from dollar sales in April and May, according to Fitch Ratings, accelerating the depreciation of the kwanza to 39% since then. In June, the government also scrapped subsidies for gasoline, which almost doubled pump prices in a nation that had one of the world’s cheapest fuel prices.
The central bank, whose governor was replaced in June, is planning to revise its inflation target of between 9% and 11% for the end of 2023. The acceleration in inflation and expectations that it will remain elevated may persuade its monetary policy committee to increase interest rates on July 14. The MPC held the key rate at 17% in May after two successive cuts.
Fitch Ratings said in a report on June 23 it expects a weaker kwanza to be one of the main drivers of upward pressure on inflation given the country’s reliance on imported food. It forecasts inflation to average 14.7% in 2023 and increase to 17.1% in 2024.
Food goods account for 55% of the weight of the consumer price index basket in Angola and for 18% of the country’s total import of goods, according to Fitch.
