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International Monetary Fund

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.

International Monetary Fund

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.

International Monetary Fund

This 2004 Article IV Consultation highlights that Angola’s GDP grew by 11 percent in 2004, following a slowdown in growth in 2003, largely reflecting the profile of oil production, which now accounts for one-half of GDP. The economy outside the extractive sector is currently estimated to be growing by about 9 percent. Despite extensive landmines and devastated infrastructure, agricultural production has recently begun to recover. Progress on structural reform and the implementation of policies to deal systematically with poverty reduction has been limited. The state continues to exercise a heavy influence in many sectors.

International Monetary Fund. African Dept.

KEY ISSUESContext and outlook: Angola’s recent economic developments have been positive, but softening oil revenue and limited proven oil reserves highlight the need to contain emerging fiscal deficits, preserve policy buffers, and continue diversifying the economy.Focus of consultation: Discussions focused on mitigating the main risks to the macroeconomic framework and, inter alia, policies to return to structural fiscal surpluses over the medium term, and to support economic diversification and inclusive growth, the modernization of the monetary policy framework, and financial stability.Key policy recommendations:• Return to structural fiscal surpluses in line with the objective set forth in Angola’s Sovereign Wealth Fund, by mobilizing additional nonoil tax revenue, improving the efficiency of public investment, and reducing current spending, including by phasing out the costly and regressive fuel subsidies—while mitigating the impact on the poor through well-targeted social assistance.• Adopt an improved medium-term fiscal framework, focusing on the structural fiscal balance to limit the impact of the oil sector on the nonoil economy.• Develop a coherent asset-liability management framework, including awell-designed stabilization fund to shield the budget from oil revenue fluctuations.• Further improve public financial management systems to avoid, inter alia, a recurrence in the future of domestic payments arrears.• Continue improving the business climate to boost economic development, diversification, and competitiveness.• In transitioning over the medium-term toward an inflation targeting regime, enhance the central bank’s capacity to collect and analyze high-frequency economic data, and continue de-dollarizing the economy.• Further strengthen the financial system, by continuing to improve the transparency and accountability of banks, and enhancing bank supervision.• Manage public guarantees transparently and with a view to minimize fiscal costs, as envisaged in the recently-approved law on public guarantees.

MIGUEL SCHLOSS

A major portion of sub-Saharan Africa’s foreign exchange earnings are devoted to the procurement of petroleum. This situation could be ameliorated: a revamping of policies and practices in hydrocarbons procurement and distribution could yield savings in the region of an amount significantly greater than yearly net disbursements of World Bank loans and credits to all the continent combined.

International Monetary Fund. Research Dept.
The Q&A in this issue features seven questions about policy options for emerging market countries (by Marcos Chamon, Chris Crowe, and Jun Il Kim); research summaries on “Does Trade and Financial Globalization Cause Income Inequality?” (by Chris Papageorgiou) and “The Current Account of Oil-Exporting Countries (by Irineu E. de Carvalho Filho); an article on the launch of the IMF’s new research journal, IMF Economic Review, and the contents of the upcoming IMF Staff Papers, which the new the new journal will succeed in 2010; an article on the upcoming Tenth Annual Jacques Polak Research Conference; a listing of visiting scholars at the IMF during July–September 2009; and listings of recent IMF Working Papers and Staff Position Notes.
International Monetary Fund
This paper provides an analysis of important factors that have affected the Angolan economy in recent years. The paper summarizes political developments since 1992 and provides an overview of developments in each major sector of the economy. The paper surveys the trade regime and reform priorities affecting it, summarizes available information on poverty, and describes issues affecting development of the diamond sector, formerly a mainstay of the Angolan economy. The paper also provides a technical analysis of the authorities’ current monetary rule, and a summary of the tax system.
International Monetary Fund. African Dept.
While improving, the economic outlook remains highly challenging, given the slow and uncertain recovery from the COVID-related shocks. Heavily dependent on oil, the Angolan economy has suffered from weakness in that sector, with falling production (related to the pandemic) and only a partial rebound in international prices recently. These shocks have led to a fifth straight year of recession and hardship. The public debt-to-GDP ratio has risen to very elevated levels, driven by recent real exchange rate depreciation. Nevertheless, strong fiscal performance and active debt management are setting the stage for a gradual economic recovery and reduction in debt vulnerabilities.
International Monetary Fund
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.