Luanda, Sept. 3, 2024 (Lusa) - The Angolan banking system's surplus reserves fell by 12.34% in July, reaching 614.73 billion kwanzas, due to dependence on foreign currency and the contraction of the national currency, according to an analysis by Banco Millennium Atlântico (BMA).
According to the analysis by the Angolan BMA, published on Monday, the excess reserves (the part of the total bank reserve that exceeds the compulsory reserves) of Angolan banking in July totalled 614.73 billion kwanzas (€606 million), an accumulated reduction of 12.34%.
For BMA economists, this decrease in the volume of surplus reserves - which represent an essential indicator of the liquidity available to financial institutions for their profitability strategies - ‘is a warning sign about the banking system's financial health and operating capacities’.
In this analysis consulted by Lusa, the banking institution's experts point out that the composition of excess reserves reveals important aspects of the country's financial structure.
They point out that approximately 82% of these reserves are in foreign currency, despite a reduction of 10.12% compared to the previous period, a dependency that can be attributed to the volatility of the economy and exchange rate fluctuations.
According to the analysis, the Angolan currency (kwanza), on the other hand, accounts for 17.53% of these reserves and this suffered a sharp contraction of 21.44% over the period.
This scenario ‘suggests that liquidity in local currency is becoming increasingly scarce, which could have a direct impact on the ability of financial institutions to implement the various monetisation strategies,’ they note.
Financial institutions in Angola have adopted various strategies to monetise their surplus reserves, namely buying foreign currency for later trading with clients, investing in Treasury Bonds, granting credit to the economy, investing abroad and exchanging liquidity with other financial institutions, the BMA points out.
According to the Banco Millennium Atlântico study, the depreciation of the kwanza, ‘which intensified from the second half of 2024 onwards’, had an impact on liquidity in national currency.
BMA economists argue that this devaluation of the kwanza increases the need for liquidity in local currency, leading to a greater absorption of resources, noting, however, that the interdependence between exchange rate policy and liquidity in the financial system ‘is evident’.
‘The effective management of these issues is crucial for economic stability. In addition, the increase in the coefficient of mandatory reserves in national currency by three percentage points to 21% in the current year has also had an impact on excess reserves," the experts write.
The analysis also states that Treasury financing revenues totalled 861.36 billion kwanzas (€849 million) in the first half of 2024, which represented approximately 18.61% of the total of 10,003.84 billion kwanzas forecast in the 2024 state budget.
‘The execution of revenues below expectations reflects the challenges faced by the National Treasury in raising funds,’ adds the BMA.
DYAS/AYLS // AYLS
Lusa
