Angola FX reserves drop despite firm oil prices

Angola’s foreign exchange reserves fell for the first time in three months to $12,1-billion in October from $12,8-billion in September, despite a sharp recovery in oil prices, the central bank said on Monday.

The drop in foreign exchange reserves happened after the central bank announced on October 2 that it would increase the amount of dollars it sells to banks at its daily auctions in a bid to prevent the national currency from depreciating.

Banco Nacional de Angola sold $1,4-billion to banks at various auctions in October, up from $583-million in the previous month, a separate central bank internal document obtained by Reuters showed.

“The drop in foreign exchange reserves may have to do with the central bank’s decision to increase the amount of dollars it sells to banks at its daily auctions,” a banking source familiar with the matter told Reuters.

Economy Minister Manuel Nunes Junior told Reuters last week Angola was in the process of settling up to $2-billion in late payments to Brazilian and Portuguese construction companies operating in the African nation, which may have also weighed on its foreign exchange reserves.

The central bank decided to increase the amount of dollars it sold to banks at weekly auctions after the International Monetary Fund announced it was likely to approve a loan of about $1,3-billion to Angola and as oil prices more than doubled to about $78 per barrel this year.

But higher oil prices have not prevented Angola’s foreign exchange reserves from falling or its local currency, the kwanza, from depreciating against the US dollar.

Reserves have dropped by 30% this year and the kwanza has depreciated by 16,3% against the US dollar, according to data by the central bank.

Angola rivals Nigeria as Africa’s top oil producer. It relies on oil for almost 90% of its exports.—Reuters