Angola started independence with a colonial legacy currency, which was soon replaced by a new currency pegged officially to the USD. The period until 2002 was dominated by the off-and-on civil war, which undermined the attempted central planning, made monetary policy subordinate to large and varying fiscal deficits and obstructed intended reforms in the 1990s. The end of the war led over time to more reform and some stabilisation, with pegged or managed exchange rates and a gradual (as yet incomplete) shift of monetary policy towards indirect instruments.

Years Targets and attainment Classification
1976-98 [NB no IMF consultations before 1990] at independence in November 1975 currency is Angolan escudo, at parity with Portuguese escudo but in practice inconvertible; coins previously issued by treasury and banknotes by local branch of Portuguese commercial bank; latter taken over and becomes central bank, but continues commercial bank operations; all other banks nationalised and consolidated in single institution; 1977 escudo replaced by kwanza, pegged to USD, but parallel market develops with high premium; Angola has large output and export of diamonds and later oil; in principle economy is centrally planned and heavily controlled, with exchange controls and foreign exchange budget, but planning is neither comprehensive nor fully effective and is hindered by acute statistical weaknesses; credit is lent automatically to government (at zero interest, with no repayment expected) and to SOEs (at fixed rates, but with many loans non-performing); exodus at independence of Portuguese skilled and semi-skilled settlers hinders economic revival; off-and-on civil war 1975-2002 has dire economic effects, contributing to low output, large fiscal deficits, high monetary growth and parallel markets for goods as well as forex; 1987, 1989 economic packages involve wide-ranging structural reform plans but few stabilising actions; 1990 package involves currency reform including monetary contraction due to strict limits on cash conversion of old kwanza at par to new kwanza (rest is converted into securities), followed in 1991 by 100% devaluation: parallel premium reduced but still very high; monetisation of fiscal deficits continues to affect prices and parallel exchange rate; 1991 start of long process to shift commercial banking operations of central bank into new commercial bank, plus wider restructuring and opening up of commercial banking; introduction of reserve requirements, also rediscount and credit ceilings (latter become important later); 1991-4 various exchange rate arrangements tried but largely ineffective, forex still rationed, high parallel market premium; demonetisation and dollarisation; 1994 partial interest rate liberalisation, but little stabilisation progress; mid-1995 new kwanza replaced by readjusted kwanza at rate of 1000:1; 1996, in context of hyperinflation,  stabilisation package leads to temporary improvements, but 1997 stabilisation package delayed by internal security situation; resurgence of depreciation 1998 with resumption of civil war; statistical database remains weak despite some improvement unstructured discretion UD
1999-2017 1999 forex liberalisation, new interbank forex market, exchange rate floated (with large depreciation), interest rates liberalised, issues of open market paper (central bank bills), currency reform with (second) kwanza equal to one million readjusted kwanzas; monetary policy remains accommodating, with recurring fiscal dominance and recurring heavy forex interventions; 2002 end of civil war brings opportunities for growth including of oil output (which has long dominated economy), but poverty is wide and deep; mid-2003 issues of treasury bonds and bills; late 2003 ‘hard kwanza’ policy stabilising but not formally pegging exchange rate (peg is periodically adjusted), with sales of foreign exchange used to absorb excess liquidity; by 2007, primary concern is with inflation, though this is not explicit, while financial market underdevelopment, weak monetary transmission, dollarisation, continuing fiscal deficits and dependence of central bank preclude use of interest rates as main instrument or move to inflation targeting; more substantial stabilisation programme late 2009 includes monetary and fiscal tightening, settlement of domestic arrears, and reforms of forex auctions (leading to large depreciation) but restrictions, inflexibilities and imbalances remain in forex market; parallel market still has significant spreads at times; 2011 new monetary policy operating framework includes monetary policy committee, central bank reference rate and standing facilities, so focus of monetary policy operations shifts from base money to interest rates, but transmission mechanism remains weak; dollarisation declining from 2010; 2014 sovereign wealth fund; from late 2014 exchange rate allowed to depreciate in response to oil price fall, parallel premium rises sharply; April 2016 exchange rate repegged to aid disinflation; substantial improvement in statistical database over period loosely structured discretion LSD

Selected IMF references: The Economy of Angola, 1975, pp29-34, 36-7, 44; RED 1990 pp1-3, 30-3, 41-3; SR 1990 pp2-10; RED 1991 pp2, 37-40; SR 1991 pp3-7; RED 1993 pp12-14, 17-18; RED 1995 pp25-6, 33-4; SR 1995 pp3-5; RED 1997 pp9, 47-51; SR 1999 pp3, 7-10; RED 2000 pp16; SR 2000 p8; SISA 2003 pp5-21; SR 2003 pp7-8; SISA 2005 pp32-4; SR 2005 pp6-8, 14-15; SISA 2007 pp7-9, 12-13, 21-2; SR 2009 p18; SR 2012 pp14-17; SR 2014 pp9-10, 14, 16, 21; SI 2015 p46-8, 56; SR 2015 pp5-7, 14-15; SR 2016 pp10-12; SR 2018 pp5, 11-12.

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