Luanda – The decrease in the basic interest rate (BNA rate) from 20% to 19.5%, recently announced by the National Bank of Angola, could motivate entrepreneurs to increase their investments in the national economy, said the economist José Lumbo on Tuesday in Luanda
Speaking to ANGOP, the Capital Market and Public Finance specialist justified his statement by the fact that the reduction in the BNA Rate signals the course of the country’s monetary policy, making the achievement of liquidity on the Interbank Money Market (MMI) cheaper.
Despite the BNA rate “not being the one charged to investors to obtain financing for their projects”, the source clarified that, with the reduction of this variable, it is expected that the other interest rates of the Angolan financial system will follow the same behaviour, positively impacting investments in the economy.
Therefore, he added, the cost of obtaining liquidity in the MMI may allow commercial banks to transfer this money to the economy at a lower cost, through bank credit.
“Technically, the macroeconomic equations show us that the interest rate has an inverse relationship with investment, that is, as the interest rate drops, investment is expected to increase and vice versa”, he clarified.
According to José Lumbo, the decrease in interest rates pointed out by the Central Bank represents an indication of an expansionist monetary policy, which has, among several objectives, increasing liquidity in the economy and stimulating consumption.
In addition to lowering the basic interest rate, the BNA’s Monetary Policy Committee (CPM) also decided to reduce the interest rate on the Permanent Liquidity Assignment Facility from 23% to 21%.
However, the expert considers that this measure has the advantage of reducing the costs of obtaining liquidity from commercial banks with the BNA, which can also be passed on to non-banking economic agents at reduced costs, via bank credit, for example.
The economist defines the Permanent Liquidity Assignment Facility as one of the monetary policy instruments used by the Central Bank, with the purpose of restricting or expanding the money supply.
“The BNA is the creditor of last resort of commercial banks, that is, when commercial banks cannot obtain liquidity on the Interbank Money Market to honor their commitments, they turn to the Central Bank, being able to opt for the Liquidity Assignment Facility, whose rate is the highest, representing a punitive rate”, he clarified.
Among other measures taken from the 107th ordinary meeting of the Monetary Policy Committee, held on 26 September, the BNA also decided to keep the inflation rate perspective below the initial forecast of 18%, until the end of the current year, moving towards the mid-term single-digit target.
According to the BNA, the application of the respective measures is due to the consistency of the slowdown in prices in the national economy, as a result of the continuous and rigorous control of liquidity, the appreciation of the kwanza regarding to the main currencies used in transactions with foreign countries and the increase in supply of essential goods for broad consumption
Source: Angola Press News Agency