Bank of Angola Adds Chinese Yuan to Approved Reserve Currencies

Angola's central bank has officially added the Chinese yuan to the list of approved currencies that commercial banks can use to fulfill their mandatory foreign-currency reserve requirements. The decision highlights the growing financial influence of China, a key trading partner and creditor to the African nation.

The Central Bank's Directive

The Bank of Angola announced the policy change in a directive dated July 2, which it published on its website this week. The move allows the yuan to be held by national banks to meet their reserve obligations, which are funds mandated by the central bank to ensure financial stability and manage liquidity within the banking system.

The Chinese currency joins a select group of foreign currencies previously approved for this purpose. The updated list of approved reserve currencies now includes:

• The U.S. dollar
• The euro
• The South African rand
• The Chinese yuan

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Economic and Geopolitical Context

This policy shift reflects the significant economic relationship between Angola and China. China is a primary destination for Angola's crude oil exports and has provided billions of dollars in loans to finance major infrastructure projects within the country. Including the yuan in its reserve framework could facilitate smoother trade and financial transactions between the two partners.

While the U.S. dollar remains the world's dominant reserve and trade currency, the yuan has been steadily gaining importance across Africa. China's position as the continent's largest trading partner has prompted several African nations to explore greater use of its currency in an effort to diversify their foreign reserves and reduce transaction costs.