Annual consumer price inflation (Indice de Precos no Consumidor) fell to 15.7% in January 2026, marking the lowest reading since August 2023 and extending a disinflationary run that has cut the rate by more than half from its mid-2024 peak above 30%. The monthly increment of 0.68% was even more striking — the slowest pace of monthly price growth since March 2015, predating the onset of Angola’s 2015-2020 economic crisis. For bond investors and monetary policy watchers, this data point confirms that the BNA’s tightening cycle has achieved its intended transmission into consumer prices.

The Disinflation Arc: From 30% to 15.7%

Angola’s inflation trajectory since 2022 divides into three distinct phases:

Phase 1 — Acceleration (2022-mid 2024). The kwanza’s sharp depreciation following the BNA’s shift to a managed float, combined with global commodity price shocks and the pass-through of fuel subsidy reductions, drove annual CPI from approximately 20% in early 2022 to a peak exceeding 30% by mid-2024. Food prices (alimentacao e bebidas nao alcoolicas) — which carry roughly 50% weight in the CPI basket — surged above 35% year-on-year, reflecting both imported food cost pressures and domestic supply constraints.

Phase 2 — Stabilization (mid 2024-Q3 2025). The BNA’s decision to raise the taxa basica to a terminal rate of 19.5% in July 2024, combined with relative kwanza stability on the FX market, began to compress price expectations. Annual CPI drifted below 25% by late 2024 as base effects started to work in favor of the headline reading.

Phase 3 — Disinflation (Q4 2025-present). The current phase represents genuine disinflation rather than mere base effects. Monthly CPI prints have declined from 1.5-2.0% in early 2025 to 0.68% in January 2026. The three-month annualized rate has fallen below 10%, suggesting that the headline annual figure will continue compressing through H1 2026 as elevated monthly comparisons from early 2025 roll off.

Monthly CPI Data

Source: Instituto Nacional de Estatistica (INE), BNA Inflation Report.

Composition: What Is Driving the Decline

Understanding the CPI basket composition is essential for assessing whether disinflation is durable or superficial.

Food and beverages (~50% of CPI). Angola imports approximately 80% of consumed foodstuffs, making food prices highly sensitive to kwanza movements and global agricultural commodity prices. The stabilization of the kwanza at roughly AOA 900/USD through the BNA’s auction mechanism has reduced imported food price pressure. Additionally, domestic agricultural output has expanded modestly (3-5% annually), with the Aldeia Nova irrigation scheme in Kwanza Sul and other programs contributing incremental supply.

Housing and utilities (~12%). The government’s phased removal of electricity subsidies — a key condition of the IMF program — created price spikes in 2023-2024. With the adjustment largely complete, this category has returned to more moderate inflation rates. Water tariffs remain heavily subsidized.

Transport (~8%). Fuel subsidy reform was the single largest contributor to inflation in 2023, when gasoline and diesel prices were raised 46% and 80% respectively. Having absorbed this one-off shock, transport inflation has normalized.

Education (~4%). Education costs have moderated as private school fee increases decelerated. Public education remains nominally free but is constrained by capacity, pushing middle-class families toward private alternatives.

Health (~5%). Pharmaceutical imports remain a persistent pressure point. Angola manufactures almost no pharmaceuticals domestically, and the cost of imported medicines tracks directly with FX movements. The planned construction of pharmaceutical manufacturing capacity through Special Economic Zones could provide medium-term relief, though production is not expected before 2028.

Structural vs. Cyclical Drivers

The current disinflation is attributable to both cyclical and structural factors, with important implications for sustainability:

Cyclical factors (temporary). Base effects from the 2023-2024 price spikes are mechanically compressing the year-on-year figure. As these elevated comparisons roll off through H1 2026, the annual rate should decline further even without additional monthly improvement. Softer global oil prices have also reduced fuel import costs for Angola’s neighbours (Angola is a net fuel exporter but imports refined products).

Structural factors (durable). The BNA’s monetary tightening — which brought the policy rate to 19.5% before the current easing cycle — has genuinely reduced credit growth and compressed demand-side inflation. The improved FX regime, with regular auctions and greater transparency, has reduced the parallel market premium to near zero, eliminating a major source of price distortion. These gains are more likely to persist.

Remaining risks. A renewed kwanza depreciation — triggered by an oil price downturn or a surge in external debt servicing — would reignite imported inflation rapidly. Angola’s 80% food import dependency means that the CPI basket is structurally exposed to FX pass-through. The pass-through coefficient (the percentage of exchange rate depreciation that feeds into consumer prices) is estimated at 0.3-0.5 over 6-12 months, among the highest in Sub-Saharan Africa.

BNA Inflation Targets and Projections

The BNA’s stated medium-term objective is single-digit inflation, a target that the central bank projects could be approached by late 2027 or 2028. The near-term trajectory depends on the pace of policy rate easing and FX dynamics:

The BNA’s 13.5% end-2026 target appears achievable given the current trajectory. If monthly CPI prints average 0.7-0.8% through the remainder of 2026, annual inflation would mechanically decline to approximately 9-10% by year-end. The consensus range of 12-14% incorporates a margin for potential supply shocks or FX volatility.

The path to single-digit inflation — which Angola has not experienced since 2015 — requires sustained kwanza stability, continued fiscal discipline (particularly no reversal of subsidy reforms), and the absence of major global commodity price shocks. The public debt trajectory is also relevant: a debt distress event that triggered kwanza depreciation would quickly unwind inflation progress.

Implications for Fixed-Income Markets

Disinflation is the primary fundamental driver for Angola’s domestic bond market. As inflation declines, real yields on Obrigacoes do Tesouro (OTs) become increasingly attractive to both domestic institutional investors and foreign participants. The current BNA rate of 17.5% against 15.7% inflation delivers a real policy rate of approximately 300 basis points — tight by historical Angolan standards, though broadly in line with the BNA’s stated objective of maintaining positive real rates.

For investors in kwanza-denominated treasury bonds, the disinflation trend creates a favorable carry environment, provided the kwanza remains stable. The key risk is that BNA easing proceeds too quickly, eroding the real rate buffer and triggering capital outflows that destabilize the currency. The EIU’s projection of 150bps in additional cuts through 2026 would bring the policy rate to 16.0% — still positive in real terms if inflation reaches 13.5%, but with a thinner margin of safety.

Eurobond investors are less directly affected by domestic CPI but monitor inflation as a leading indicator of fiscal and FX stability. Sustained disinflation reduces the probability of a balance-of-payments crisis, supporting the sovereign credit trajectory. Angola’s Eurobonds currently trade at yields of 8-9%, reflecting the Ba3/B+ rating and the concentrated maturity profile in 2028-2029.

Historical Context

Angola’s inflation history includes several extreme episodes that condition institutional memory and policy credibility:

• 1990s hyperinflation. During the civil war, annual inflation exceeded 4,000% in 1996, destroying domestic savings and the kwanza’s predecessor currencies.
• Post-war stabilization (2002-2014). Following the 2002 ceasefire, inflation declined gradually to single digits by 2012-2014, supported by massive oil revenues and a pegged exchange rate.
• Oil shock inflation (2015-2020). The 2014 oil price collapse and subsequent kwanza devaluations drove inflation back above 40% by 2016, before gradual stabilization.
• Current cycle (2022-2026). The latest inflation spike was milder than the 2016 episode, peaking around 30% rather than 40%, and the disinflation has been faster, reflecting improved BNA credibility and a more transparent FX regime.

The BNA’s success in bringing inflation from 30% to below 15% in roughly 18 months — without triggering a recession — represents its most credible policy achievement since independence. Whether this credibility survives the easing cycle, when the temptation to cut rates faster than fundamentals warrant is highest, will determine the central bank’s medium-term inflation anchor.