(Bloomberg) -- Angola's kwanza is rallying because of an improving outlook for the economy of Africa's second-biggest oil producer and the liberalization of its foreign-exchange regime, the nation's central bank governor said.
“We have been witnessing an increase in confidence in the currency, generating considerable gains for the kwanza,” Jose de Lima Massano said Wednesday in an emailed response to questions. “International reserves are solid, covering about 11 months of imports, the balance of payments shows surpluses and we are beginning to see a gradual reduction in the monthly rate of inflation.”
The kwanza has strengthened 20% this year, making it the world's best-performing currency against the dollar.
The currency's gains have coincided with a boom in the price of oil, which accounts for 90% of Angola's export revenue. Brent crude prices almost doubled in the past year to as high as $139 a barrel earlier this month before paring some gains. Angola's economy is forecast to expand 2.9% this year after exiting five years of recession in 2021, according to the International Monetary Fund.
Read: Oil Boom Turns Angolan Kwanza Into a World-Beating Currency
Angola's currency is also recovering from a depreciation of “just over 80%” against the dollar that began after the central bank ditched the kwanza's peg to the dollar in 2018, said Massano.
That step was among measures by the central bank to end “major dysfunctions and imbalances in the Angolan exchange market” and narrow the gap of about 150% between the kwanza's official exchange rate and its price on the black market, he said.
The kwanza's “balance has been restored,” said Massano, referring to the difference between the official rate and the unauthorized market value.
The currency traded at 510 to a dollar in the parallel market Wednesday, said Maria Chiminha, a currency trader. The official rate is 468.340, according to data on the central bank's website.
“We have adopted an open trading platform in which foreign currency buyers and sellers can trade without any interference from the central bank,” he said. “The Banco Nacional de Angola continues to monitor the market, being able to intervene whenever it detects imbalances in the currency's behavior, but so far, it has not proved necessary.”
Massano said in an interview with Radio Nacional de Angola on Jan. 8 that higher oil prices were also contributing to the kwanza's strength.
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