High inflation is preventing the National Bank of Angola (BNA) from reducing the basic interest rate as a way of increasing credit to the economy, said on Friday in Luanda the governor of the central bank as he announced the decisions of the Monetary Policy Commission (CPM).
José de Lima Massano said in a press conference that the inflation rate is high, at 18.74% on year in February, and it is necessary, “to continue to try to stabilise prices in our economy.” He said that, within the CPM there are some who believe the basic interest rate should be increased, which is negative and lower than the rate of inflation.
Keeping the basic interest rate unchanged, as decided on Friday, at 15.5%, should be seen as a sign that, despite high inflation, there is room to support the economy, the governor said. He also noted that the CPM had opted to use obligatory reserves of commercial banks by the BNA to offer credit to the manufacturing sector.
As he presented the figures that led to the decision to keep the basic interest rate unchanged, the governor said that Gross International Reserves stood at US$16.39 billion in February 2020, as compared with US$16.84 billion in January (2.61% less), of the equivalent of 8.34 months of imports of goods and services.
International Net Reserves totalled US$10.89 million, which was a drop of 3.9% against January (US$11.34 billion) and was noted by Massano as being, “above the recommendations of the International Monetary Fund (IMF) and the conventions of the Southern African Development Community (SADC).”
The Monetary Policy Commission also decided to keep the overnight permanent liquidity absorption rate unchanged at 0%, to reduce the 7-day rate from 10% to 7% and keep obligatory reserve rates in national and foreign currency at 22% and 15%, respectively.
The CPM also decided to set up a liquidity line of a maximum amount of 100 billion kwanzas (US$184.5 million) for the acquisition of public securities in the hands of non-financial companies.
It also made the decision to extend credit without obligatory reserves to 54 Prodesi products and the minimum number of credit operations each bank is authorised to offer, exempt limits on settlement to import goods in the basic food basket and on medication and set 1 April to start using the Bloomberg platform for foreign currency operations by oil companies and the National Oil and Gas Agency (ANPG).