GOVERNMENT OF ANGOLA

Memorandum of Economic and Financial Policies

February 2001

I. Introduction

1. This memorandum describes the government's economic program for 2001, which was formulated in consultation with the staff of the International Monetary Fund. The government has requested the continued monitoring of its program by Fund staff during the first semester of 2001. By publishing this memorandum, the government intends to keep the public informed about its policies and objectives and reaffirm its commitment to an irreversible process of economic reform, transparency, and poverty reduction.

II. Recent Developments and Performance in 2000

2. In April 2000, the government formulated an economic program to be monitored by the staff of the International Monetary Fund (IMF). The execution of this program, however, was hindered by inadequate expenditure control mechanisms, delays in the compilation of fiscal, monetary, and external debt data, and insufficient coordination among government agencies. In addition, performance under the program is likely to have been affected by difficulties in the timely mobilization of technical assistance, which was partly related to insufficient implementation of previous recommendations. While pending balances on oil-related transactions among the treasury, the National Bank of Angola (BNA), and the state oil company (SONANGOL) were eliminated, a number of unbudgeted transactions (mainly security-related) as well as advances from the BNA have been made without prior authorization from the treasury. Other remaining problems are the continued accumulation of large intra-public sector arrears, primarily those between the government and SONANGOL on account of oil revenues and fuel subsidies.

3. The 12-month rate of inflation fell from its recent peak of 437 percent in May 2000 to 268 percent in December 2000 (Table 1). The difficulties in reducing inflation reflect a fragile security situation, insufficient expenditure controls, and an overly expansive monetary policy. Moreover, with interest rates significantly lower than inflation, the functioning of the financial system continued to be impaired and dollarization further promoted.

4. Notwithstanding the aforementioned problems, the government has made progress in implementing a number of important structural reforms during 2000 (Table 2). Preparatory work for the diagnostic study of the oil sector, including signing of the contract with KPMG (winner of the international tender), was completed in November 2000. A similar process was undertaken in relation to an independent audit of the National Bank of Angola (BNA). The government has also signed a five-year contract with Crown Agents for the management of customs, with the goal of modernizing customs administration, improving transparency in the collection of trade taxes, and providing additional government revenue. The decree abolishing restrictive import licensing has been published, and a preliminary analysis of the privatization plan for state-owned enterprises and banks was prepared. An inventory of domestic public debt was completed in November 2000, and the large stocks of intra-public sector arrears were identified and quantified earlier in the year.

5. Based on results for the first three quarters of 2000, the overall fiscal deficit in 2000 is estimated to be 2 percent of GDP, compared with a 2 percent surplus planned under the program. Higher oil prices increased government revenue, but outlays on defense, transfers, and other nonprogrammed expenditures were higher than projected. In addition, accelerated payments on oil-guaranteed loans exerted significant pressure on the financing side. It should be noted, however, that weaknesses in the debt statistics and fiscal accounts has made it difficult to fully assess fiscal developments so far.

6. The government is keenly aware of the serious deficiencies in key macroeconomic data that complicate timely and accurate policy analysis. Technical assistance from the Fund in recent months in government finance statistics addressed important shortcomings in the compilation methodology, coverage, and consistency of the fiscal accounts. Similarly, a follow-up mission in money and banking statistics provided assistance to improve the quality of monetary data. The government has been following up on the recommendations made by those missions, and expects to implement them fully by February 2001.

7. Foreign assets of the banking system increased rapidly during the year, which, coupled with the financing of large, sporadic, fiscal imbalances during the second quarter of 2000, provided the background to an excessive monetary expansion and a rapid increase in prices and the exchange rate. As a result, some of the key quantitative targets for June 2000 were missed (Table 3). The disbursement of a US$500 million oil-guaranteed bank loan in September 2000 facilitated the achievement of the targets on net international reserves, net domestic assets, government deposits, and external debt arrears for end-September 2000, but it led to the nonobservance of the program ceiling on nonconcessional debt.

8. Since December 2000, the government has implemented a number of actions designed to address these problems and bring the program in line with its original objectives. The actions include: (i) establishing an agreement between the treasury and the BNA under which no more payments will be effected on behalf of the government without the issuance of the corresponding payment order ; (ii) stepping up the control of cash payments from the treasury to prevent unbudgeted and unauthorized expenditures; (iii) formulating a quarterly budget for 2001 consistent with a monetary program designed to bring about a rapid deceleration of inflation; (iv) formulating a timetable for adjusting fuel prices with a view to drastically reducing transfers to the refinery and the distributor; (v) adjusting water and electricity tariffs to bring them to cost recovery levels by mid-2001; (vi) formulating a plan for imposing strict guidelines and objectives on the management of the two state-owned banks and for the privatization of the Banco de Comércio e Indústria (BCI) by June 2002 (section III.D below); and (vii) preparing actual data on debt stock and arrears for end-June and end-September 2000 and projections of debt flows for the next four quarters.

III. The Program for 2001

9. The government recognizes that inflation increases poverty and is a fundamental barrier to economic development. It also believes that the problem can only be solved through a prudent monetary policy and an efficient management of public resources. The program for 2001 aims at reducing the12-month rate of inflation from 268 percent in December 2000 to no more than 150 percent in June 2001 and to 75 percent in December 2001 (Table 4). The program also contemplates an increase in real GDP growth from 2 percent in 2000 to 3.4 percent in 2001. Oil output is expected to fall slightly in 2001 as a result of the slowing down of production in older fields, but such a decline will be more than compensated by a large increase in the output of diamonds and a recovery of agricultural production.

10. The program for the period January-June 2001 to be monitored by the Fund staff is anchored on the 2001 budget and the corresponding financial program for the whole year. The monitoring of the implementation of the program will be based on quarterly quantitative benchmarks for the first half of the year (Table 5), a set of structural and transparency-related benchmarks (Table 6), and a list of structural measures (Table 7).

A. Monetary Policy

11. The BNA will conduct an active and independent monetary policy focused on lowering inflation and meeting the financial targets under the program. It will use a monetary anchor to achieve the inflation target and will continue to allow the exchange rate to be determined by market forces. The program's ceiling on net domestic assets (NDA) of the banking system, which is the operative intermediate target for monetary control, will be enforced through ceilings on the NDA of individual banks. The program targets an increase in net international reserves during the first half of the year, and a small withdrawal of government deposits of the banking system. Broad money is expected to grow by 75 percent during 2001 (Table 8).

12. While commercial bank interest rates have been liberalized since 1998, they have remained highly negative in real terms. To encourage financial savings, improve the allocation of resources and help contain the dollarization of the Angolan economy, it is important that banks become more sensitive to interest rates and that the level of interest rates in kwanza-denominated loans and deposits become higher than the rate of inflation. To this end, the BNA will begin in January 2001 to sell central bank bills through competitive bidding by commercial banks and private sector agents. To prepare the ground for an eventual move to indirect instruments of monetary control, the BNA will gradually increase its placements of central bank bills. Furthermore, the BNA will encourage commercial banks to freely transact with their clients the level of interest rates on loans and deposits, and will adjust the discount rate as necessary to ensure that it remains consistent with the objectives of the program.

13. The BNA will strengthen coordination with the treasury to prevent damaging bursts of liquidity and take immediate actions to adjust monetary policy as needed to achieve the inflation objectives under the program. The BNA and the Ministry of Finance will also work to establish a framework for preparing liquidity forecasts and monitoring treasury flows and liquidity conditions in the banking system. Lastly, the BNA will take appropriate action against banks that fail to comply with prudential regulations and incur delays in the submission of their balance sheets.

B. Fiscal Policy

14. The success of monetary policy in lowering inflation requires the pursuit of a tight fiscal policy. The general government balance (on a commitment basis) would improve from a deficit of 2 percent of GDP in 2000 to a surplus of 3 percent in 2001, thus providing room to reduce the heavy burden of external financing on commercial terms (Tables 9a-c).

15. The program assumes an average price of Angola's oil of US$25 per barrel in 2001. Total government revenues are expected increase slightly in terms of GDP in 2001, but to decrease slightly in dollar terms. Oil revenues would fall from US$3,260 million in 2000 to US$3,180 million in 2001 on account of lower production and prices. Non-oil revenues are expected to increase by 0.5 percent of GDP as a result of tax measures introduced this year and new measures to be introduced in 2001. These measures include a broadening of the sales tax, the rationalization of the sales tax structure, and an increase in the maximum personal income tax rate from 20 percent to 35 percent to match the corporate tax rate. In 2001, the government will start regular audits of large taxpayers and will expedite the process for the outsourcing of customs management to Crown Agents.

16. During 2001, total expenditures will be reduced by about 4.5 percent of GDP. There is also a need to improve the quality of expenditure, moving toward an efficient allocation on selected poverty-reducing outlays. The budget envisages that a reduction of expenditure on defense and security and other expenditures will be partially compensated by increases of expenditures on health, education, and the public investment program.¹ The reduction of defense expenditures is related to an expected decline in military activity now that the government controls over 90 percent of the national territory. Transfers will decline during the year, owing to the reduction of fuel subsidies and periodic adjustments in water and electricity tariffs (Appendix I). To alleviate the impact of fuel price adjustments on vulnerable groups, the program contains specific subsidies to liquified petroleum gas (LPG), gas oil, and kerosene, which weigh heavily in the consumption basket of the poorest segments of the population. Public sector wages will increase gradually during 2001, with increases based on the program inflation target plus 10 percent in real terms.

17. To improve the effectiveness of fiscal policy, the government has decided to carry out a more rigorous control of expenditure authorizations, including the elimination of payments on behalf of the treasury without payment orders; ensure that all revenue, expenditure, and financing are processed through the treasury account; and ensure that all ministries and government entities adhere strictly to their budget allocations. In addition, the government is committed to begin implementing an integrated budgeting and accounting system during 2001, and to evaluating existing expenditure programs in order to eliminate unnecessary expenditure. The program also includes the repayment of US$250 million of arrears to domestic suppliers, out of which US$100 million will be paid in cash and US$150 million in the form of an indexed bond. Each repayment will consist of the same proportion of cash to bonds (1:1.5). Moreover, since January 2001, the government will no longer incur payment arrears on its domestic obligations including, inter alia, salaries, expenditures on goods and services, capital expenditures, and transfers.

C. External Sector Policies

18. The stock of public and publicly guaranteed debt amounted to US$8.3 billion (95 percent of GDP) at end-September 2000, of which US$4 billion was in arrears. Despite an unexpected delay, the government has cleared all arrears to multilateral creditors by January 2001, including the African Development Bank and the Arab Bank for Economic Development in Africa. Given the massive scale of resources needed for economic and social rehabilitation, a reduction of Angola's heavy external debt burden remains an essential objective of the government's strategy. Accordingly, the government has decided to limit the cumulative amount of new or refinanced medium-and long-term public and publicly guaranteed external debt to no more than US$269 million during 2001, and to avoid incurring any additional short-term external debt. For budgetary and balance of payments reasons, only part of the oil-guaranteed debt and a small amount of bilateral debt falling due can be serviced in 2001.

19. It is the government's expectation that an eventual arrangement with the Fund could help catalyze fresh disbursements from multilateral creditors and donors, as well as the establishment of normal relations with all creditors. The government will begin the process of reconciling the debt with Paris Club and other creditors, with a view to eventually making a request for debt rescheduling. Once relations with creditors have been normalized, the government intends to stop borrowing on nonconcessional terms.

20. During the program period, the government does not intend to (i) introduce multiple currency practices; (ii) impose new restrictions or intensify existing restrictions in the area of payments and transfers for current international transactions; (iii) introduce new restrictions on imports or intensify existing restrictions for balance of payments purposes; or (iv) enter into new bilateral payments arrangements that are inconsistent with Article VIII of the Articles of Agreement of the Fund.

D. Structural and Other Measures

21. The government will continue its efforts to implement a sound medium-term framework for poverty reduction, including structural and social reforms as well as a public investment program, in order to enhance the economy's supply response. To give new impetus to the implementation of economic reforms, the government will be taking decisive action in five key areas: governance and transparency of public sector operations; the divestiture of state assets, the strategy for public banks; fuel prices and public utility tariffs; and poverty reduction.

22. Governance and transparency. The independent audit of the BNA, conducted by Ernst & Young, will be finalized by March 2001. At the same time, the diagnostic study of the oil sector was initiated in January 2001, and a first report on its findings will be submitted in April 2001. An audit of the diamond sector companies associated with ENDIAMA (Empresa Nacional de Diamantes de Angola, the state's diamond sector concessionaire) by Ernst & Young is under way, and the government has launched a public tender for a diagnostic study of ENDIAMA in January 2001. Based on the outcome of these initiatives, the government and the staffs of the IMF and the World Bank will reach understandings on whether a more comprehensive diagnostic study of the sector needs to be conducted. As part of the ongoing efforts to tackle corruption, the government has decided to undertake a complete review of the public procurement system. Terms of reference for the review will be agreed with the staffs of the IMF and the World Bank in May 2001.

23. In addition to its commitments to eliminate unauthorized payments outside the budgetary process and to implement a modern and integrated system of budgeting and accounting, the government will begin implementing, in early 2001, a plan for the clearance of intra-public sector arrears, and it will institute procedures for the full recording of grants in the budget. The government will also ensure that SONANGOL eliminates all of its arrears by December 2001 and that the delays in transfers of fuel subsidies are minimized.

24. Institutional and legal framework for privatization. The government will reach understandings with the staffs of the IMF and the World Bank on a revised privatization program for the period 2001-05, that will include public enterprises as well as banks. As part of the required institutional and legal framework for a sound implementation of its privatization program, the government will strengthen the privatization unit—Gabinete de Redimensionamento Empresarial (GARE)—and formalize its reporting responsibilities vis-à-vis the Ministry of Finance. It will also review the related legislation (particularly Law 10/94 and Law 13/94), with a view to ensuring full consistency between the legal framework and the privatization program.

25. State-owned banks. The process of liquidating the Caixa de Crédito Agropecuário e de Pescas (CAP) bank has been delayed because of difficulties encountered in identifying remaining assets and liabilities, given the lack of a reliable accounting system. The government has included in the budget for 2001 the estimated remaining losses of the CAP bank, and will proceed to complete its liquidation by April 2001.

26. In order to create the conditions for the development of a competitive and modern financial system and to improve the efficiency of operation of the two active state-owned banks—Banco de Comércio e Indústria (BCI) and Banco de Poupança e Crédito (BPC)—, the government will initiate a process by which at least 51 percent of its participation in the capital of the BCI will be sold to a strategic investor by June 2002. A financial advisor will be hired by June 2001 to assist in preparing the BCI for privatization. Other important measures related to the banking system include an assessment of the recapitalization needs of both the BCI and the BPC by February 2001, and the signing of performance contracts between the government and the boards of administrators of these two banks. The objectives of these contracts are to provide better incentives to the management of these banks to prevent the dissipation of their assets through loans made at subsidized interest rates or under conditions in which repayment would not be expected and/or demanded. Lastly, the government will analyze the BPC's staff redundancies and their associated costs, as well evaluate its branch network in the provinces.

27. Fuel prices and public utility tariffs. The government is committed to promoting the good use of the country's natural resources and to avoiding the fiscal and inflationary imbalances that arise from unduly large and misdirected subsidies. To this end, the government will adjust periodically the domestic prices of petroleum products in order to ensure convergence to target prices, quoted in U.S. dollars, as described in Appendix I. Water (in the province of Luanda) and electricity tariffs will also be periodically adjusted so as to converge, within the time frame of the staff-monitored program, to the U.S. dollar equivalents of their respective cost recovery levels, as agreed with the World Bank staff. Once convergence has been achieved, fuel prices and public utility tariffs will be periodically adjusted to prevent the erosion of their value as a result of exchange rate depreciation and inflation. The adjustment mechanisms for water and electricity tariffs are described in Appendix I.

28. Poverty reduction strategy. The government will complete a draft interim poverty reduction strategy paper (interim PRSP) by March 2001. Preliminary consultations with the donor community and civil society representatives, both in Luanda and in the provinces, on different parts of the draft interim PRSP will take place between December 2000 and March 2001. The government prepared a preliminary work program for the full PRSP (encompassing also activities pertaining to the preparation of the interim PRSP), describing its activities, cost estimates, government resources available, and the existing financing gap, which will be presented to the donor community to seek their support in a coordinated way.

IV. Program Monitoring

29. Quantitative and structural benchmarks. To monitor progress in policy implementation under the program, quarterly quantitative benchmarks have been established (as set out in Table 3) with respect to net international reserves of the BNA, medium-and long-term liabilities of the BNA; net domestic assets of the banking system, net credit to the government from the banking system, medium-and long-term nonconcessional debt and short-term debt, external payments arrears of the public sector, and arrears to multilateral institutions. The quantitative targets under the program will be adjusted for deviations according to the mechanisms described in the technical memorandum of understanding. Structural benchmarks and measures (Tables 5 and 6) have been established to serve as guideposts for the process of economic reform.

30. Technical assistance. In order to increase its capacity to implement the program, the government has underscored the need for further technical assistance, and the Fund, the World Bank, and other bilateral and multilateral sources have been approached with requests to help secure the resources needed for that purpose. The highest priority is being attached to issues related to transparency and control of government operations. Draft terms of reference for a complete overhaul of expenditure management and the integrated public accounting systems have been submitted to the donor community. The Fund has also been approached to provide technical assistance in the areas of tax and customs administration; balance of payments and debt statistics; liquidity management and control; monetary operations and monetary policy; and bank supervision. It is also critical to obtain technical assistance on external debt management and on the analysis of the public procurement system. The government stands ready to provide the needed resources to supplement those made available by the international community and to take the necessary steps, including legal and institutional measures and the provision of adequate resources, to maximize the effectiveness of technical assistance and follow up expeditiously on the experts' recommendations.

Government of Angola: Technical Memorandum of Understanding

1. This memorandum defines the quantitative targets and selected structural measures that will be used in the monitoring of the program described in the memorandum of economic and financial policies for the period January 2001-June 2001.

I. Quantitative Benchmarks

2. The floor on net international reserves, and the ceilings on net domestic assets of the banking system, net credit to the government, and medium- and long-term liabilities of the central bank will be end-of-period stocks, while the ceilings on external and internal arrears and on nonconcessional borrowing will be computed as cumulative changes from end-September 2000.

3. Net international reserves (NIR) of the National Bank of Angola (BNA) are defined as gross international reserves of the BNA net of its short-term external liabilities. Gross reserves of the BNA are those that are readily available (i.e., liquid and marketable and free of any pledges or encumberments), controlled by the BNA, and held for the purposes of meeting balance of payments needs and intervening in foreign exchange markets. They include gold, holdings of SDRs, the reserve position at the IMF, holdings of foreign exchange and traveler's checks, demand and short-term deposits at foreign banks abroad, fixed-term deposits abroad that can be liquidated without penalty, and any holdings of investment grade securities. External liabilities of the BNA comprise liabilities to nonresidents contracted by the BNA with an original maturity of less than a year, any net off-balance-sheet position of the BNA (futures, forwards, swaps, or options) with either resident and nonresidents, and any arrears on principal and interest to external creditors and suppliers. The net foreign assets of the banking system comprise the net international reserves of the BNA, as defined above, and the net foreign assets of the commercial banks. The latter are net of short-term liabilities vis-à-vis nonresidents.

4. The net domestic assets (NDA) of the banking system are defined as the difference between M3 (money, quasi money, and other liabilities, including bonds in the hands of the nonbank public) and the net foreign assets of the banking system. NDA is defined to include the medium- and long-term liabilities of the BNA and of commercial banks. To compute NDA, the foreign currency components of NDA and the net foreign assets of the banking system will be valued at the program exchange rates agreed with the authorities.

5. The general government covers the state budget (central and provincial), autonomous funds, and social security. Net credit to the government (NGC) by the banking system is defined as gross credit to the general government minus government deposits in domestic and foreign currency. Gross credit to the government includes implicit credits in the form of BNA advances, such as for government debt service, open foreign exchange operations, or credits to the treasury account for unsettled tax liabilities (under the "oil account" or otherwise). The monetary accounts will register transactions in foreign currency deposits at the market exchange rate of the day of deposit or redemption. For evaluating performance under the program, the foreign currency component of NCG will be valued at the program exchange rates.

6. External debt will be understood to mean a current, that is, noncontingent, liability, created under a contractual arrangement or a guarantee, by the government of Angola, the BNA, and state-owned enterprises, with a nonresident party through the provision of value in the form of assets (including currency) or services, and which requires the obligor to make one or more payments in the form of assets (including currency) or services, at some future point(s) in time; these payments will discharge the principal and/or interest liabilities incurred under the contract. Debt can take a number of forms, the primary ones being as follows:

• Loans. Advances of money are made to obligor by the lender on the basis of an undertaking that the obligor will repay the funds in the future (including deposits, bonds, debentures, commercial loans, and buyers' credits) and temporary exchanges of assets that are equivalent to fully collateralized loans under which the obligor is required to repay the funds, and usually pay interest by repurchasing the collateral from the buyer in the future (such as repurchase agreements and official swap arrangements).

• Suppliers' credits. Under these contracts, the supplier permits the obligor to defer payments until some time after the date on which the goods are delivered or services are provided.

• Leases. Under these arrangements, property is provided that the lessee has the right to use for one or more specified period(s) of time that are usually shorter than the total expected service life of the property, while the lessor retains the title to the property. For the purpose of the guideline, the debt is the present value (at the inception of the lease) of all lease payments expected to be made during the period of the agreement, excluding those payments that cover the operation, repair, or maintenance of the property. This definition includes debt contracted or guaranteed (regardless of whether the values have been received), arrears, penalties, and judicially awarded damages arising from the failure to make payment under a contractual obligation that constitutes debt; it excludes rescheduling operations.

7. The limits on newly contracted or refinanced medium- and long-term nonconcessional public and publicly guaranteed external debt apply to debt contracted or guaranteed by the state, the BNA, the state oil company SONANGOL, or other state-owned companies. For purposes of the quantitative benchmarks, external debt will be valued in U.S. dollars at the exchange rate prevailing at the time the contract or guarantee becomes effective. External debt with a maturity longer than one year will be classified as medium and long term; debt will be considered concessional if it has a grant element equivalent to 35 percent or more using the available country-specific commercial interest reference rate (CIRR) and following the methodology set out in staff paper SM/96/86 (4/8/96) as approved by the IMF Executive Board on April 15, 1996. It is understood that short-term debt will exclude regular import-related credits. The government of Angola, the central bank, or SONANGOL will not guarantee any external debt contracted by private sector banks or firms.

8. The limits on short-term external debt apply to debt contracted by the government, the BNA, SONANGOL, or other state-companies with an original maturity of one year or less. Excluded from the limit are changes in indebtedness resulting from rescheduling and normal import-related credits. Debt falling within the limit shall be valued in U.S. dollars at the exchange rate prevailing at the time the contract or guarantee becomes effective.

9. The limits on the accumulation of external payment arrears apply to overdue interest and amortization payments on all types of public and publicly guaranteed debt. The limits exclude the accumulation of arrears arising from interest on the stock of arrears.

10. The quantitative benchmarks under the program will be subject to the following adjusters:

• Price of oil. The floor on NIR will be adjusted upward (downward) and the ceilings on NDA and NCG will be adjusted downward (upward) to reflect any excess (shortfall) of the actual average export price in U.S. dollars of Angolan crude oil from the following reference prices:

  Table A1. Oil Price Assumptions

  First quarter 2001	US$26.1 per barrel
  Second quarter 2001	US$25.4 per barrel

The adjustment for each quarter will be US$20.4 million for each deviation of 100 cents of U.S. dollars per barrel from the program reference prices. In the case of a shortfall in oil export prices from the program reference prices, the adjustment will be limited to a maximum difference of US$4 per barrel. The adjustment for each quarter on NDA and NCG will be obtained by converting the above-mentioned dollar amounts into kwanzas using the program exchange rates.

• Foreign financing. The quantitative targets are set on the assumptions for new or refinanced loans and arrears accumulation specified in Table 5 of the memorandum of economic and financial policies. In cases where these amounts exceed (fall short of) the assumed amounts, the NIR target will be adjusted upward (downward), and the NDA and NCG ceiling will be adjusted downward (upward) by converting this difference into kwanzas using the program exchange rates.

• Domestic arrears. The NDA and the NCG ceiling will be adjusted downward (upward) by any flow of domestic arrears in excess (short of) the amounts assumed in the program.

• Oil bonuses. The program for 2001 assumes an amount of US$250 million in the second quarter of 2001 related to signature bonuses for oil exploration rights. In case the actual amount exceeds (fall short of) the projected amount, the NIR target will be adjusted upward (downward), and the NDA and NCG ceiling will be adjusted downward (upward) by converting this difference into kwanzas using the program exchange rates.

II. Structural Measures Under the Program

11. Fuel prices. Domestic petroleum prices will be adjusted by the 15^th day of the months of March, May, July, September, and November 2001 to the dollar equivalents specified in table A2 below using the actual exchange rate prevailing at the end of the preceding month.