(Bloomberg) -- Angola's central bank has ordered lenders to give their clients the option of converting their foreign-currency mortgages into kwanzas.
The move aims to reduce the risk of default amid a sharp depreciation of the local currency of Africa's second-biggest oil producer. Only bank customers whose income is paid in kwanzas qualify, the central bank said in a statement published on its website Wednesday.
Lenders should use the official exchange rate and refrain from charging a commission when converting the loan of any eligible customer wishing to take advantage of the directive, the Banco Nacional de Angola said.
The kwanza has weakened 22% against the dollar this year, ballooning the debt of many homeowners. It's expected to depreciate more than 50% in 2020 from last year following a drop in crude prices, Gerrit van Rooyen, an analyst at the South African-based NKC African Economics, said in a Sept. 16 research note.
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The Banco Nacional de Angola, which in 2014 banned banks from giving out any further loans in foreign currency, except to exporters and to the state, said lenders should consider extending the maturities of these mortgages to help clients meet repayments.
Banks which convert mortgages into kwanzas will be allowed to purchase a similar amount of foreign currency from the central bank, it said.
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