The Transition From Stabilization to Growth How and Why to Move Beyond Exchange Based Stabilization in Angola

Abstract

This article argues the pros and cons of the Angolan government’s current policy of exchange rate based stabilization. First, the current policy is described together with a rationale in favor of such a program. Second, the reasons for being opposed to such a strategy are discussed. Third, is a discussion of how to move from the current policy regime to one more supportive of long term growth. In brief, the paper argues that the short run benefits of stabilizing the economy and restoring confidence in the currency were worthwhile, but that as time goes on the increasing costs of maintaining the policy begin to outweigh the benefits. In particular, the high dollar cost of stabilizing inflation and the Kwanza impose costs on import-exposed producers and directly on the government itself which will impede future growth.