Angola’s Economic Crisis: A Tale of Two Currencies

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Angola, an African country rich in natural resources, is facing an economic crisis that has left its citizens struggling to access foreign currency. The local currency, the kwanza, sells at two vastly different prices - one set by the bank and the other determined by the black market. This unusual situation has led to a thriving illegal trade in dollars.

The Black Market Economy

In Luanda, the capital city, women can be seen sitting on buckets and plastic chairs, clutching their purses tightly as they engage in this lucrative business. They exchange local currency for coveted dollars at exorbitant rates. Donna Marta, one such woman, makes around $4 for every hundred kwanzas she changes.

The Cause of the Crisis

The reason people flock to her is because they cannot buy dollars from the bank, a problem that has been exacerbated by the sharp decline in oil prices since 2014. Oil accounts for approximately 98 percent of Angola’s exports, and when its price dropped by half, so did the number of dollars the country received.

The Central Bank’s Dilemma

At the same time, the central bank refused to devalue the currency in an effort to keep inflation in check. However, this move has led to a situation where international banks will not touch kwanzas, making it difficult for Angolans to buy imported goods.

The Challenges Ahead

Pedro Da Silva, an economic consultant, sums up Angola’s two big challenges: devaluing its currency and finding ways to make money outside of oil. However, he believes that corruption is the real issue, citing a lack of transparency in financial transactions as the main obstacle to overcome.

Breaking Free from Corruption

Fixing this problem would require Angola to open up its finances for international scrutiny, a move that could be difficult for a country known for its corruption. Additionally, devaluing the currency would also mean eliminating a lucrative business for a select few.

The Consequences of Inaction

The economic crisis has led to a stalemate in many businesses, with some even forced to close their doors due to the lack of access to foreign currency. As Angola struggles to find a solution, it remains to be seen how long this situation will continue.

Key Points

• The kwanza sells at two different prices: one set by the bank and the other determined by the black market.
• The decline in oil prices has left the country with a shortage of dollars.
• The central bank’s refusal to devalue the currency has led to international banks rejecting kwanzas.
• Corruption is seen as a major obstacle to overcoming the crisis.
• Devaluing the currency would eliminate a lucrative business for some individuals, but could also lead to increased transparency in financial transactions.