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Historic currency depreciation continues to push up staple food prices

  • Key Message Update
  • Angola
  • July 2023
Historic currency depreciation continues to push up staple food prices

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  • Key Messages
  • Key Messages
    • Following the removal of fuel subsidies and halt to support measures to the Angolan Kwanza, reported on in FEWS NET's June Remote Monitoring Update, the local currency has significantly depreciated, stabilizing in late July around its lowest value on record: 824/USD. Headline inflation rates have increased, according to the Angola Central Bank (BNA), from 10.62 percent in May to 11.25 percent in June Although is change reflects an atypical increase, inflation is still lower than at the same time last year when it was 21.4 percent.

    • The economic challenges, which include difficulty securing foreign currency, are also constraining the capacity of traders to import at typical levels, according to the BNA. Although the information on the food stocks in the Strategic Food Reserve (REA) is not made available, it is FEWS NET’s expectation that the same challenges are resulting in lower REA stock levels than normal. In the second week of July, REA food (wheat flour, maize flour, rice, soy oil, and beans) prices (which are lower than commercial market prices) continued to increase relative to the first week of July by roughly 10-20 percent, on average across main markets. The ongoing macroeconomic challenges are primarily affecting poor urban households, who rely principally on markets to meet their food needs and now face higher food and transportation prices.

    • In contrast, rural poor households are relatively less affected as they have access to local crop production, and many affected by previous shocks are being targeted for government interventions and social safety nets. Additionally, the scale of food price increases is lower, at about 1-3 percent in July relative to June, according to key informants. The government’s social safety net program has increased from 8,000 AOA/month to 11,000 AOA/month per household and is being distributed in drought-affected areas of Huila and Cunene, although no information is available on the number of beneficiaries or transfer size. Fuel cards, which exempt small-scale taxi drivers from paying the full fuel cost, have now been distributed in Huambo, Benguela, and Malanje, but key informants suggests these cards have only reached about ten percent of the targeted population of these provinces, and distribution to other provinces has not yet occurred.

    • The current drier-than-normal conditions in the central and southern provinces is negatively affecting flood-recession planting in Benguela, Huambo, Huila, and northern Namibe and Cunene, which is estimated at only 50 percent of average according to Ministry of Agriculture. The forecast below-average rainfall during the upcoming October 2023 to March 2024 season, driven by El Niño conditions, is particularly concern for the southwest, which has experienced consecutive years of drought. Although it falls outside of the current projection period, it is already anticipated that 2024 crop and livestock production will be below average, likely resulting in higher food assistance needs next year.

    • Crisis (IPC Phase 3) outcomes are likely in Huila, Namibe, and Cunene in July 2023. These areas experienced below-average production, resulting in higher market dependence amid higher food prices and relatively lower livestock prices. Households reached with government interventions are likely facing no acute food insecurity (IPC Phase 1!) or are Stressed! (IPC Phase 2!), but it is not possible with limited information on assistance to comment on the scale of the intervention’s impacts. Some poor households in the rest of the country will face Stressed (IPC Phase 2) outcomes through September when their crop production is depleted and they increasingly rely on markets at higher food prices, though non-agricultural labor opportunities and wild foods will mitigate worse outcomes. Stressed (IPC Phase 2) outcomes are likely to be more widespread among urban poor households, given their heavy reliance on markets and relatively higher food prices in urban areas.

    This Key Message Update provides a high-level analysis of current acute food insecurity conditions and any changes to FEWS NET's latest projection of acute food insecurity outcomes in the specified geography. Learn more here.

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