Economic activity and social conditions have been adversely affected by the intensification of the civil war. The goal is to restore domestic and external equilibrium and create the conditions for sustained growth, especially by boosting the growth of the non-oil sectors, lowering inflation to single-digit rates, improving the efficiency and transparency of public sector operations, and enhancing the role of the private sector. In March 1999, the government launched an adjustment and reform program. The authorities have made adjustments in fuel prices and electricity tariffs.
The staff report for the 2007 Article IV Consultation on Angola highlights economic performance, macroeconomic stability, and fiscal policy. Growth in the medium term will rely increasingly on the non-oil sector, where reforms to promote private sector development will be critical to offset a potential loss in competitiveness from an appreciating real exchange rate. A key challenge is to ensure that political pressure to scale up public spending does not undermine macroeconomic stability. Lower output growth and oil revenues than envisaged in the baseline scenario could jeopardize public and external debt sustainability.
This Selected Issues paper on Angola reports that oil production in Angola accounts for about half of GDP and about 75 percent of government revenue. The projections for the government’s fiscal position in the medium term will be crucially dependent on both the value of oil production and the proportion that will accrue to the government. However, in addition to the usual uncertainties associated with projections of the total value of oil output, the government’s share has been subject to volatility.
Several years of high inflation rates have negatively affected economic conditions in Angola. Macroeconomic stabilization in Angola entails strict control over central bank credit to the government, an ending of the quasi-fiscal expenditures, and a reduction of the national bank of Angola’s deficit. Reserve adequacy is an important factor for stable economic development and management. This note reviews some of the main challenges faced by Angola's policymakers in launching a credible subsidy reform, and also reviews the sources and uses of state oil revenue in Angola.