Between 2015 and 2018, Angola experienced the most severe foreign exchange crisis in its modern history. The oil price collapse that began in mid-2014 cut the country’s export receipts roughly in half, draining the Banco Nacional de Angola’s (BNA) reserves from a peak of $32 billion in 2013 to below $17 billion by late 2017. Yet the official exchange rate remained frozen at approximately 165 AOA/USD – a rate that the market had long since ceased to believe. The parallel market (mercado paralelo), where businesses and individuals obtained dollars that the formal banking system could not supply, priced the kwanza at 500-600 AOA/USD by 2017, implying a premium exceeding 150%.
The system was unsustainable. This is the story of how it was dismantled.
The Crisis That Forced Reform
The fixed-peg regime depended on a simple mechanism: Angola’s oil exports generated dollar revenues that flowed to the BNA, which then sold dollars to commercial banks at the official rate. When oil revenue was abundant, the system functioned, however inefficiently. When oil revenue collapsed, the BNA faced an impossible choice – defend the peg by depleting reserves, or ration dollar supply and accept that the official rate would become fictional.
Angola chose rationing. By 2016-2017, the BNA was allocating dollars administratively through a priority system that favoured state enterprises and connected firms. Private-sector companies, including multinational oil services firms, reported waiting six to twelve months to convert kwanza earnings into dollars for dividend repatriation. The backlog of unmet dollar demand was estimated at $3-5 billion.
The consequences were pervasive. Foreign direct investment (FDI) flows collapsed as international firms questioned whether they could extract returns. Import-dependent businesses faced shortages. The informal market, dominated by kinguilas (street currency dealers), became the de facto pricing mechanism for much of the non-oil economy. Government policy had created precisely the conditions that IMF orthodoxy warns against: a dual exchange rate system that distorted resource allocation, encouraged rent-seeking, and punished productive investment.
IMF Conditionality and the Path to Reform
The political transition from President dos Santos to President Lourenco in September 2017 opened a window for structural reform. In December 2018, the IMF approved a $3.7 billion Extended Fund Facility (EFF) for Angola – the largest in Sub-Saharan African history at the time. Exchange rate flexibility was a core structural benchmark.
The reform timeline unfolded in two stages:
Stage 1 – Managed devaluation (January 2018). The BNA adjusted the official rate from 166 to 253 AOA/USD, a 34% step-devaluation (desvalorização). This was significant but insufficient; the parallel market premium remained at 50-80%.
Stage 2 – Managed float (October 2019). The BNA formally adopted a regime cambial flutuante administrado (managed floating exchange rate regime), allowing the rate to be determined by supply and demand at foreign exchange auctions. The central bank retained the right to intervene to smooth disorderly market conditions but abandoned any target level for the exchange rate.
What Changed Structurally
The liberalization was not merely a rate adjustment but a comprehensive reform of Angola’s FX market architecture:
Auction-based allocation. The administrative allocation system was replaced with competitive BNA FX auctions held twice weekly. Commercial banks submit bids specifying the volume and price at which they wish to purchase dollars. The weighted-average accepted bid rate becomes the reference rate.
Interbank market development. Banks were encouraged to trade foreign exchange among themselves rather than relying exclusively on BNA supply. While interbank volumes remain modest by international standards, the existence of an interbank market provides an additional price-discovery mechanism and reduces the BNA’s role as sole market-maker.
Capital account opening. Alongside the exchange rate reform, Angola relaxed certain capital controls. Aviso 15/2019, a landmark BNA directive, exempted capital markets transactions from the Contribuição Especial sobre Operações Cambiais (CEOC), the special contribution on foreign exchange operations. This meant that foreign investors in BODIVA-listed securities could repatriate proceeds without additional BNA authorization, provided the original investment was properly registered.
Transparency improvements. BNA auction results, including total amounts offered, allocated, and the range of accepted bids, are now published regularly. This represented a significant departure from the opacity of the administrative allocation era.
Impact Assessment: Six Years On
The parallel market premium collapsed. From 150%+ in 2017, the spread between formal and informal rates fell to under 5% by late 2025 – close enough to reflect transaction costs rather than systemic dysfunction. This is the single most important indicator that the reform worked as intended.
Inflation initially spiked, then moderated. The pass-through from depreciation to consumer prices was substantial. Annual inflation, which had already been elevated at around 20%, accelerated to above 25% in 2020-2021 as the weaker kwanza raised import costs. However, the BNA’s tight monetary policy – with the base rate (taxa BNA) at 17.5% – has since brought inflation down to 15.7% year-on-year as of January 2026.
FDI recovered. While not yet at pre-crisis levels, foreign direct investment inflows have improved meaningfully since 2020. The removal of repatriation risk was a prerequisite for international portfolio interest in Angolan treasury bonds and the nascent equity market.
The kwanza depreciated sharply, then stabilised. The USD/AOA rate moved from 253 at the start of the float to approximately 914.60 today – a cumulative depreciation of roughly 72%. But the adjustment was front-loaded: the rate has been broadly stable in the 912-919 range through early 2026, suggesting the kwanza is approaching fair value.
| Metric | Pre-Reform (2017) | Current (Feb 2026) |
|---|---|---|
| Official rate (AOA/USD) | 166 | 914.60 |
| Parallel premium | >150% | <5% |
| BNA reserves | ~$17B | $15.31B |
| Import cover | ~5 months | 7.87 months |
| Inflation (YoY) | ~20% | 15.7% |
| BNA base rate | 18% | 17.5% |
Unfinished Business
Six years into the reform, several challenges remain. The interbank market is still shallow, with the BNA remaining the dominant source of dollar supply. Forward and derivatives markets for the kwanza are virtually non-existent domestically, forcing investors to rely on offshore NDFs or natural hedging strategies. The kwanza remains overwhelmingly an oil-driven currency: a sustained decline in crude prices below $60/bbl would test the regime’s resilience.
The deeper question is whether the managed float can survive political pressure during an election cycle. The 2027 general elections will be the first since liberalization to occur during a period of relative currency stability – but if oil prices weaken and the kwanza comes under renewed pressure, the temptation to intervene aggressively or revert to administrative measures could resurface.
Nevertheless, the 2019 liberalization stands as the most consequential macroeconomic reform in Angola’s recent history. It replaced a system that was destroying investor confidence and distorting the entire economy with one that, for all its imperfections, delivers price signals that are broadly trusted by the market.