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UPDATE 1-Angola's kwanza set for major fall as dollar peg ends

(Adds Lourenco comments on state spending)

LUANDA, Jan 8 (Reuters) - Angola's kwanza is set for a big fall on Tuesday when the central bank abandons its dollar peg, the latest in a string of policy and personnel changes by President Joao Lorenco since he came to power in Africa's number two oil producer in September.

Two banking sources said the Central Bank of Angola (BNA) would hold a foreign exchange auction on Tuesday, the first since it announced a shift away from a currency peg to a trading band against the dollar last week.

The auction was originally supposed to take place on Friday, the two sources said, adding that they expected the kwanza to depreciate between 20 and 30 percent under the new rules.

South Africa-based NKC African Economics said the kwanza, which is currently valued at 165 to the dollar, could be as much as 40 percent overvalued. The current black market rate is around 400, a discount of nearly 60 percent.

The BNA, which walks in step with government policy, said last week it was switching from a currency peg to an as-yet-undefined trading band due to its depleting foreign reserves, which have more than halved since 2013 to $14 billion due to a slump in global oil prices.

The government is also looking to renegotiate billions of dollars owed to multinational lenders such as the International Monetary Fund or foreign governments including China, which has huge oil-for-infrastructure deals with Luanda.

In another sign of his plans to overhaul Angola's oil-dependent but stagnating economy, Lourenco made clear he wanted limits to government spending, ruling out salary increases for civil servants for now.

"When the economy is a little better, it's only right that it should move the national salary, but now it would not be very advisable," Lourenco told reporters at a media event to mark 100 days in office.

Laurenco took over last year from Jose Eduardo dos Santos, Angola's leader of the last 38 years, and almost immediately set about dismantling the grip his predecessor's family held over sub-Saharan Africa's third-biggest economy.

Dos Santos' daughter, Isabel, was dismissed as head of state oil giant Sonangol in November and Lourenco said on Monday he might change the leadership of a $5 billion sovereign wealth fund.

The fund is run by dos Santos' son, Jose Filomeno, and is the subject of an external inquiry into its performance and governance which is due to be wrapped up soon. (Reporting by Joe Brock; Writing by Ed Cropley; Editing by Alison Williams)