Kwanza slump adds to clouds over Angola’s outlook

Angola’s recent 40% devaluation of the kwanza will add to inflation pressures and prompt the central bank to tighten monetary policy aggressively, all of which will weigh on near-term growth. The large share of public debt in foreign currency, means that the debt-to-GDP ratio will rise. But Angola’s large primary surplus will help to get debt declining again quickly. And with FX reserves sufficient to cover the government’s upcoming FX debt repayments, for now we think that a sovereign default will be avoided.