In 1990 the Angolan government changed the currency from the kwanza to the nova kwanza. This was done to reduce the money supply and force prices down in the informal sector , which operated parallel to the more regulated conventional market. This measure was taken to satisfy requirements of the World Bank, the IMF, and other financial institutions as part of the reforms that these institutions see as essential to higher growth and poverty reduction in Angola. A devaluation followed in which the official value of the kwanza was cut in half. In order to control the foreign exchange in circulation, 4 different exchange rates were applied in the banking system. Privatization was also introduced gradually because of pressure from international financial institutions. This liberalization process was stopped in 1992 due to resumption of the war.
Angola's financial woes heightened in 1994 and the government renewed its reform efforts. Since 1993 there has been a 25 percent decline in real GDP . In 1994 the government's budget deficit was US$872 million. The central bank attempted to address these deficits by increasing the money supply, but this raised inflation to 1,838 percent in Luanda in 1993, in 1995 inflation had reached 3,700 percent. In 1994 another adjustment program was attempted. However, this was made more difficult by the development of a robust informal sector with
| Exchange rates: Angola | |
| kwanza per US$1 | |
| Jan 2001 | 17,910,800 |
| 2000 | 10,041,000 |
| 1999 | 2,790,706 |
| 1998 | 392,824 |
| 1997 | 229,040 |
| 1996 | 128,029 |
| Note: In December 1999 the kwanza was revalued with six zeroes dropped off the old value. | |
| SOURCE : CIA World Factbook 2001 [ONLINE]. | |
its own credits and expenditures which were outside the control of the Ministry of Finance. In 1994 as much as 60 percent of the income of the state was outside treasury accounts.
There has yet to be any economic stabilization in Angola. There are 2 reasons why it might continue to be difficult to obtain even with a peace process. First, military expenditures will remain high because of the previous history of broken peace processes, in addition to the involvement of other countries in the conflict. Second, strong adjustment policies may antagonize the population, because they may want to see change come about quicker than is practically feasible.
The nova kwanza has dropped in value against the U.S. dollar for several years. In 1995, the official rate was Kzr2,750 to the dollar, and by January 2000, the rate had risen to Kzr577,304 to the US$1.