% annual growth rate:
Sources: M3 from Banco Nacional de Angola and nominal GDP from IMF database, as at February 2022
The medium-term relationship between money and nominal GDP growth in Angola, 1995-2020
Five-year moving averages of annual % changes, with 1997 being the start of the first five-year period
Comment on monetary trends in Angola
In its final decades as a Portuguese colony, Angola was experiencing strong economic growth, with its abundant natural resources, including oil, diamonds and timber, being the backbone of the economy. However, while much of Africa achieved independence from colonial rule in the 1960s, the Portuguese refused to give up its colonies and a period of civil unrest began. A coup d'état in Portugal in 1974 resulted in the formation of a military government which agreed to grant independence to all former colonies. Angola was ill-prepared for independence, however, and the country was plunged into a civil war which lasted with only a few short intermissions until 2002.
Even with peace established, Angola's recovery has been slow and painful, but its economy grew rapidly in the first decade after the end of the war. The opening up of economy to the private sector helped to drive the growth. Oil became once again the principal export although this has caused the economy to stagnate since oil prices started to fall in 2014. Inflation, which was over 200% at the end of the civil war, dropped below 10% in the early 2010s, although it rose to over 40% in 2016 and is still over 15%.
The combination of high inflation, falling export revenues from oil sales and a sharp fall in the value of the Kwanza (the national currency), resulted in Angola seeking a bail-out from the International Monetary Fund in 2016. Among the measures demanded by the IMF as a precondition of the loan was a tightening of monetary policy. Interest rates were raised from an all-time postwar low of 8.75% to over 15% and banks' reserve ratios were increased. Angola has cooperated with the IMF and is keen to implement a more effective monetary policy to stabilise the country's economy. It is also keen to improve its other national institutions and finally to leave behind the damaging effects of the long civil war, the legacy of which continues to this day, especially in the agricultural sector.