Foreign Currency Crisis Tells The Story Of Angola's Economic Peril
DAVID GREENE, HOST:
The African country of Angola is in an economic crisis. One of the issues is that the local currency, the kwanza, sells for two different prices - one at the bank, one on the black market. NPR's Eyder Peralta reports from Angola's capital.
EYDER PERALTA, BYLINE: As you walk around Luanda, you'll see a lot of women sitting on buckets and on plastic chairs, clutching their purses close to their bodies. What they do is illegal, but it's common knowledge that they are kinguilas.
In those purses, they have wads of local currency and coveted dollars. Donna Marta says she used to sell cigarettes, but after the price of oil plummeted in 2014, she began seeing her colleagues make easier money selling dollars.
DONNA MARTA: (Foreign language spoken).
PERALTA: She says she makes about $4 for every hundred she changes. People come to her when they have to travel or when they have to buy something from abroad. I ask why they would come to her if the official rate is almost half of what she's charging.
MARTA: (Through interpreter) I don't know what happens, but people actually cannot buy dollars from the bank. I don't know why.
PERALTA: Someone who does know why is Rebecca Engebretsen, who is studying the Angolan economy at Oxford. The simple answer - the price of oil.
REBECCA ENGEBRETSEN: Oil stands for approximately 98 percent of Angola's exports. So most of the dollars that Angola - or for other foreign currencies that Angola gets is through oil.
PERALTA: During the oil boom, Angola was swimming in dollars. But a few years ago, the price of oil dropped by half. That meant the number of dollars Angola got also dropped by more than half. The government keeps most of it and distributes precious little to the banks.
At the same time, trying to keep inflation in check, the country's central bank refused to devalue its currency. International banks know that, so most just stopped buying kwanzas.
ENGEBRETSEN: And that's very problematic for Angola, particularly because it's so dependent on imports.
PERALTA: Angola imports pretty much everything. It's an oil producer, for example, that imports most of its gasoline. But right now, given that international banks won't touch the kwanza, if you want to buy anything, you need dollars.
To Engebretsen, it points to Angola's two big challenges. It has to devalue its currency and find ways to make money outside of oil. But right now, most business in Angola is stalled. Pedro Da Silva is an economic consultant.
PEDRO DA SILVA: I have no clients. Even I have to close my office.
PERALTA: He still has a spectacular house on the outskirts of Luanda, but his business is dead because it was based on advice given to big companies building hotels or big housing developments. Now they simply can't do business in Angola because the banks will not sell them dollars.
DA SILVA: If you want to continue make your business, you have to go in free markets just to get these dollars, and then the exchange rate is too high.
PERALTA: But he says businesses are willing to do that - if possible, even to buy from the kinguilas, or the women on the street. So to Da Silva, the problem is not oil or inflation. The problem is...
DA SILVA: Corruption. We are not clear in our transactions, and the investments and everything.
PERALTA: But fixing that means that Angola, which is famously corrupt, would have to open up its finances for the world to see. And Engebretsen, the economist, points to one more thing. If you have access to the dollars at the official exchange rate, you could make a lot of money selling them on the black market. Devaluing the currency would also mean getting rid of a lucrative business for a select few. Eyder Peralta, NPR News, Luanda.
(SOUNDBITE OF IKEBE SHAKEDOWN'S "KUMASI WALK")
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