Journal Issue


International Monetary Fund
Published Date:
August 2012
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1. Angola has emerged from more than four decades of war to become Africa’s second largest oil exporter and its third largest economy. The war decimated infrastructure, weakened institutions, and brought the economy to a standstill. During the oil price boom of 2003–08 Angola began to rebuild its infrastructure, the oil and non-oil sectors grew substantially, and per capita GDP reached middle-income levels.

2. Angola was vulnerable when the global financial crisis hit in 2009. Fiscal and monetary policies were highly expansionary, backing a full-steam reconstruction effort, and the exchange rate was overvalued. After the collapse in oil prices in 2008-09, Angola experienced a sharp contraction in its oil revenue, its main source of foreign exchange, and faced growing macroeconomic instability. Against the backdrop of international reserves falling by one-third in the first half of 2009, the authorities sought support from the Fund for their stabilization program.

3. The authorities’ stabilization program supported by the 2009–2012 Stand-By Arrangement (SBA) achieved its key objectives. Three years after the abrupt decline in world oil prices, Angola has attained: an improved fiscal position, a more comfortable level of international reserves, a stable exchange rate, and lower inflation. Large domestic arrears were settled and significant progress was made toward improving fiscal transparency and accountability. However, income inequality remains high, and poverty in rural areas is widespread.

Recent Economic Developments

Angola - Growth, 2002–2012

(Annual Percent Change)

Sources: National authorities; and Fund staff estimates and projections.

4. Overall macroeconomic stability improved in 2011. Oil production problems constrained oil sector growth, but non-oil growth compensated for the decline, resulting in an overall real growth rate of 3.9 percent. Headline inflation declined to 11.4 percent by year-end, helped by a stable exchange rate. The overall fiscal surplus increased to 10.2 percent of GDP, mainly due to high oil prices. The external current account improved, and international reserves rose to the equivalent of almost 7 months of imports.

5. Fiscal consolidation, critical in supporting macroeconomic stabilization during the crisis, was however partly reversed in late 2011. Larger-than-expected spending on goods and services, surging subsidies, and quasi-fiscal operations (QFOs) conducted by Sonangol (the state-owned oil company) on behalf of the government contributed to widen the non-oil primary deficit (NOPD), from 43.6 to 48.2 percent of non-oil GDP.

Angola - Fiscal Balances, 2002–2012

Sources: IMF staff calculations.

6. In late 2011, Angola introduced important institutional reforms to enhance accountability in public spending and predictability of oil revenue transfers to the budget. Specifically:

  • The authorities have begun to phase-out QFOs by Sonangol. To this end, Presidential Decree No. 320/11 regulates the execution of the 2012 budget and provides a roadmap for the gradual assumption of payments related to QFOs by the budget units.1

  • The authorities have taken measures to enhance information on oil revenue transfers to the budget. Presidential Decree No. 58/11 establishes a new framework for statistical reporting and analysis of oil sector activities and sets up interagency working groups responsible for ensuring monitoring and reconciliation of oil revenue due and transferred to the treasury. In this context, the authorities committed to avoid the accumulation of oil revenue receivables from Sonangol to the treasury related to the current fiscal year by end-2012.

7. Despite these efforts, preliminary data suggest that transfers of 2012 oil revenues from Sonangol to the budget may have been delayed. As of end-February 2012, Sonangol’s payables to the treasury relating to 2012 operations have increased by US$2.7 billion. The delay may be in part related to the ongoing cross-verification of QFOs. If continued, however, these delays may undermine the major source of budget revenue and require unplanned adjustment to the pace of budget execution. In addition, the large unexplained residual in the fiscal accounts from 2007 to 2010 has not been completely explained as planned; work is still ongoing to produce a Reconciliation Report for that period, reconciling cross-claims between Sonangol and the treasury.

Angola - Inflation, January 2010–March 2012


Sources: National authorities and IMF staff estimates.

Angola - Policy Rates, January 2010–March 2012


Sources: National authorities and IMF staff estimates.

Angola - Credit to the Private Sector, 2002–March 2012

(Percent of GDP)

Sources: National authorities and IMF staff estimates.

Angola - Exchange Rate Developments, January 2002–April 2012


Sources: IFS.

8. The monetary stance was relaxed starting mid-2011 as inflationary pressures subsided. The policy rates were reduced and reserve requirements lowered. The BNA-bill rates are now in negative territory in real terms. Credit to the economy, still relatively low at 20 percent of GDP, grew by 30 percent in 2011. The expansion was mainly due to consumer credit to individuals, which increased sharply (to one fifth of the total) and occurred despite high lending rates and banking spreads, which reflect elevated credit risks and banking sector concentration.

9. External sector developments have been favorable in 2011. Supported by the continued improvement in the terms of trade, the current account increased further to 9.6 percent of GDP. This facilitated the decline in external debt to GDP to 19.7 percent. The foreign exchange market stabilized, with a more predictable supply of foreign exchange provided by the BNA to the market (around US$1 billion a month). Inflation differentials more than offset the mild depreciation of the Kwanza, causing the real effective exchange rate (REER) to appreciate by some 5 percent.

Angola - Credit by Activity Sector March 2012

(Percent of total credit)

Sources: BNA.

Angola - Non-Performing Loans by Sector, March 2012

(Percent of total NPLs)

Sources: BNA.

Outlook, Risks, and Policy Challenges

10. The outlook for 2012 is relatively favorable, but affected by the recent decline in oil prices and other uncertainties. The pace of economic activity is expected to accelerate with overall growth at 6.8 percent in real terms. Oil production is rebounding. Non-oil sector growth is expected to moderate somewhat compared to 2011. The energy, transportation, and construction sectors are likely to benefit from a gradual scaling up of public investment programs and from the settlement of past government arrears. However, agricultural output and food-related prices are affected by a drought. Inflation is expected to continue declining slowly, to 9.6 percent by end-2012.

11. On the fiscal front, the authorities are assessing the realism of the 2012 budget, also in light of the 2011 outcome. The budget was predicated on a conservative oil price assumption (US$77 per barrel) but it did not take into account the higher level of spending implied by the progressive incorporation of QFOs. Because the 2011 overrun reflects in part ongoing priority QFOs, and in light of the decision to incorporate these QFOs in the fiscal accounts, the authorities are weighing the need for a supplementary budget. This would allow for a more accurate reflection of higher spending. It would regularize the situation and prevent the incurrence of new domestic arrears that may arise as a result of overly tight budget allocations. Taking into account 2011 developments and the oil price forecast, staff foresees an overall fiscal surplus of 6.1 percent of GDP, and an NOPD of 44.5 percent of non-oil GDP in 2012 (compared to 48.2 percent in 2011).

12. On the external front, the current account surplus will be significantly affected by the projected decline in oil prices. This will be compounded by increased imports associated with the pre-salt oil field-related FDI inflows. While reserves accumulation will likely remain relatively robust, the speed of accumulation could level off.

13. If oil prices were to fall substantially short of current WEO projections for a prolonged period, Angola would be unable to accumulate further reserves. For instance, if oil prices were to average US$85 per barrel for the remainder of 2012, the government would need to draw down its deposits beginning in the third quarter and reserves would stagnate. The situation could be exacerbated if Sonangol were to further delay the transfer of oil revenue to the treasury due in 2012, or if external sources of financing were to dry up.

14. Against this backdrop, the Article IV consultation focused on the following set of policy challenges:

  • Angola currently lacks a comprehensive fiscal framework to shield the economy from volatility in oil prices, oil production, and uncertainty in the institutional setting for oil revenue management. The absence of such a framework could undermine hard won macroeconomic stability gains and the implementation of ambitious development plans. Economic activity in key sectors is closely linked to budget execution. This tends to magnify the negative effects of stops and starts in public investments on the real economy.

  • Given elevated external risks and Angola’s continued dependence on oil, further accumulation of international reserves is warranted to shield import-intensive investment from external shocks.

  • Building on existing efforts, economic policies need to continue enabling the structural transformation and diversification of the economy. Sustained implementation of policies to unlock Angola’s vast economic potential is needed to support inclusive growth and employment.

15. Over the next few years, these challenges will unfold against a global economy where downside risks remain elevated. The risk of continued turmoil in Europe is still high, and could affect indirectly Angola through lower export demand and greater investor risk aversion. In this environment, Angola will have to balance the need for public infrastructure investment against the accumulation of additional fiscal and reserves buffers.

I Getting the Policy Mix Right

A. Fiscal Policy

Under the SBA, Angola put fiscal policy on a sounder footing. Important strides toward strengthening public financial management, and a prudent fiscal stance, allowed Angola to clear sizable domestic arrears. The focus of policymakers is now shifting to the medium term and the ambitious development agenda.

16. Three sources of oil revenue uncertainty pose risks to Angola’s fiscal performance:

  • Prices. Like all oil exporters, Angola faces volatile export prices for its oil production basket. To hedge against this risk, the authorities have used conservative oil price assumptions in formulating their budget (typically two-thirds of the realized world price).

  • Quantities. Oil production is inherently uncertain, as technical problems can arise at any time—and uncertainty increases as wells age. That said, for 9 of the last 10 years the budget forecast for oil production has been overly optimistic. This tendency exacerbates the risks for the budget.

  • Institutions. The recurrent problem of unpredictable transfers of oil revenue due from Sonangol to the treasury has been an important additional source of uncertainty, resulting from Angola’s institutional setting. The risk is that oil revenue transfers are the residual out of Sonangol’s financial operations.

The authorities recognize that, of these three sources of uncertainty, the institutional setting is fully under their control (Appendix 1).

17. It is important that fiscal policy formulation be based on a medium-term fiscal framework, to reduce the impact of oil revenue volatility and to ensure a smoother implementation of priority capital spending. Currently, fiscal policy formulation is still largely limited to a one-year budget horizon. This practice makes public investment susceptible to volatile oil revenue and exacerbates fiscal policy pro-cyclicality. Specifically, the absence of a medium-term fiscal framework:

  • undermines the implementation of multi-year public investment programs;

  • makes it difficult to quantify recurrent costs associated with the needed build-up of infrastructure; and

  • complicates policy coordination between the Ministry of Finance and the National Bank of Angola (BNA), including on the desirable pace of reserve accumulation.

Angola - Oil Price, 2002–2011

(U.S. dollars per barrel)

Angola - Oil Production, 2002–2011

(Millions of barrels)

Angola - Central Government Oil Revenue Volatility, 2002–2011 1

(Receivables in percent of GDP)

1 Values indicate oil revenue receivables of the central government from Sonangol. The receivable in each year is calculated as the shortfall(-) or excess(+) of oil revenue transferred to the treasury relative to the oil revenue due that year. Excess payment may leave oustanding claims.

Sources: National authorities and IMF staff calculations.

To be effective, a medium-term fiscal framework needs to be comprehensive, and include all QFOs undertaken by Sonangol. It also needs to strike the right balance between overcoming current capacity constraints, scaling up investment, and building additional policy buffers.

18. In this setting, first, efforts to enhance governance and transparency in the flow of funds related to oil revenues should continue. The authorities’ commitment to phase-out QFOs undertaken by Sonangol and to incorporate them in the fiscal accounts is essential for an accurate assessment of the fiscal policy stance. Given existing capacity constraints, it is unlikely that this process will be completed in 2012 as originally envisaged. Nevertheless, the authorities’ have made progress on the reconciliation of 2011 oil revenue, and efforts are ongoing for early 2012 data.

19. Second, transfers of oil revenues from Sonangol to the budget should be more predictable. The stock of oil revenue receivables related to 2011 due from Sonangol to the treasury stood at about US$3.1 billion at end-2011. The authorities should continue to strengthen the institutional setting and adhere to the principle of avoiding the accumulation of new receivables in 2012.

20. Third, strengthening the governance of the existing Oil for Infrastructure Fund (OIF) and ensuring that it is fully funded should be given the highest priority. The establishment of the OIF is a first step toward mitigating the impact of volatility on investment spending. That said:

  • Rather than earmarking resources for specific sectors (power and water), the OIF should aim to protect the overall investment envelope while allowing investment priorities to adapt over time.

  • Clear rules governing the withdrawal of resources should be defined.

  • Deposits and disbursements pertaining to the OIF should be explicitly reported and published in budget documents.

  • Resources remaining at the end of any fiscal year in the Reserve Account (funded with resources from the difference between actual and budgeted oil prices) should be transferred into the OIF to further provide for future investment needs.

21. Over the medium term the authorities will have to create fiscal space to support the scaling up of investment spending within a reduced resource envelope. While non-oil tax revenue is expected to increase as a result of revenue administration reforms, it will not fully offset the decline in oil revenue implied by oil price and production projections. Current spending is projected to remain stable, but capital spending will rise by 3 percent of GDP by 2017 as the authorities implement their development plan. As a result, the overall fiscal balance will turn to a deficit by 2016. The gradual pace of this scaling-up effort will allow time to further strengthen capacity and reinforce fiscal buffers and institutions. Four aspects are key in this context:

  • Pressing ahead with the non-oil tax reform agenda, particularly by broadening the tax base and further improving collection and administration efforts. The authorities have hired more staff to perform audits, simplified tax procedures, introduced withholdings at the source for some taxes (including corporate income tax), and now require suppliers be current on tax obligations to be eligible for government contracts.

  • Ring fencing the fiscal agent function of Sonangol concessionaire from its corporate commercial activities. In particular, staff advocated: (i) pursuing separate income and balance sheet accounting and reporting for the concessionaire function to further promote audit and accountability; and (ii) reviewing the automaticity of the 10 percent reimbursement to Sonangol for its concessionaire services and moving to a system of cost-based reimbursement for expenses effectively incurred as concessionaire.

  • Containing the rising cost of fuel subsidies (7.8 percent of GDP in 2011, equivalent to over 90 percent of public investment spending). Staff recommended achieving this by reforming fuel price pass-through mechanisms and further reducing refinery subsidies. If left unmodified, these poorly targeted subsidies will continue to drain public resources away from other urgent social and infrastructure priorities.

  • Implementing a medium-term fiscal framework, anchored on the NOPD, to facilitate setting realistic expenditure ceilings for the realization of multi-year projects. In staff’s view, the NOPD is the most appropriate fiscal anchor to assess the fiscal stance and sustainability of policies. Other anchors (including the nonoil current primary balance and the overall balance) may be problematic to implement and monitor, and may paint a misleading picture of the fiscal stance.2

22. The debt outlook appears manageable, but this assessment is based on limited data. Under current projections, the ratio of public sector debt to GDP would increase slightly (to 36.9 percent by 2017), while the ratio of public external debt to GDP increases to about 23 percent. However, scenario analysis shows that external and domestic debt levels are vulnerable to oil price and growth shocks (see Debt Sustainability Analysis). Staff also encouraged the authorities to expand the coverage of debt statistics to include external private debt and domestic state-owned enterprise debt, in order to more accurately assess potential risks. Moreover, staff encouraged the authorities to conduct a cost-benefit analysis of financing sources since credit lines (the main financing source as of now) may carry low interest rates and are easy to manage, but may carry hidden costs such as those resulting from noncompetitive project bids. Staff shares the authorities’ views that, given the ongoing turmoil in world financial markets, sovereign bonds issuance would be ill timed at this juncture.

Angola - Total Public Debt, 2000–2011

(Percent of GDP)

Sources: National authorities.

Authorities’ Views

23. In regard to the medium-term, the authorities stressed the need to strengthen mechanisms to shield priority spending from oil revenue volatility. They agreed that a critical step would be anchoring budget formulation in a medium-term fiscal framework, which would allow policy makers to strike a better balance between scaling up public investment and further building up reserves buffer. Some steps have already been taken. The 2013 budget preparation is set to include a first-ever medium-term (2013-17) macro-fiscal scenario, for which the authorities have requested technical assistance from the IMF. The authorities also noted that the non-oil current primary balance could serve as an alternative anchor to guide budget formulation, under the premise that investment spending will generate future positive payoffs, including increased tax revenue.

24. In regard to 2012, the authorities are considering the case for a supplementary budget. They explained that the surge in spending that occurred in the last quarter of 2011 was largely due to QFOs coming on top of delayed budget execution. They acknowledged that subsidy costs were significantly above budgeted levels, but pointed to new legislation aimed at reducing the cost of subsidies to the budget.3

B. Monetary Policy

The policy discussion focused on the constraints to effective monetary policy transmission arising from shallow domestic markets, excess liquidity, and paucity of bankable projects, and on the need to support sustainable financial sector development with enhanced supervisory capacity.

25. The BNA’s objective is to reduce inflation to 10 percent by end-2012 and to single digits thereafter. The BNA sees exchange rate stability through highly managed foreign exchange auctions as key instrument to achieve the disinflation objective.4 Since early 2010, the rate has moved between KHz 90-95 per U.S. dollar. Given the still shallow interbank market, the relatively high degree of dollarization, and the large fraction of imported consumer goods, exchange rate stability has contributed to the gradual disinflation process. As a further check, the BNA monitors that broad money aggregates expand broadly in line with expected real growth and targeted inflation.

26. Continued accumulation of international reserves supports the anchoring role of the exchange rate. The authorities target a level of international reserves equivalent to at least 9 months of imports, close to the average level for resource dependent countries with managed exchange rates. Given Angola’s reliance on a single export commodity, its limited access to international financial markets, the high degree of dollarization and the remaining weaknesses in the financial system, such a buffer appears appropriate and can help shield import-intensive investment from damaging interruptions. The projected current account deterioration over the medium term underscores the need for a significant reserve buffer while oil prices remain favorable.

Angola - Reserves Developments, 2002–2011

Source: IMF World Economic Outlook.

27. The monetary policy operational framework was recently overhauled (Box 1.)

Box 1.The BNA’s New Monetary Policy Operational Framework

In August 2011, the BNA approved its new monetary policy operational framework, upgrading and expanding instruments available to achieve its monetary policy objectives. This framework became operational in January 2012.

The new framework introduces the concept of “Reference Interest Rate” (RIR) which is used to signal the policy orientation of the BNA. It also distinguishes between instruments targeting monetary policy objectives and those related to lender of last resort objectives.

The LUIBOR is the rate at which financial institutions trade uncollateralized liquidity in the interbank market. It is calculated as a weighted average of interest rates in the interbank market and regularly published by the BNA.

The permanent liquidity facility (PLF) is intended to absorb or provide banks with overnight liquidity. Such liquidity is offered at the BNA’s RIR plus a spread, to ensure that overnight liquidity is traded preferably in the interbank market. The BNA has also established an intraday PLF.

The new open market operational framework, includes: (i) a short-term refinancing facility for periods up to 7 days, which can be rolled over by the BNA on banks’ request, and are offered on a weekly basis; (ii) a longer-term refinancing facility, for maturities up to 28 days, offered monthly; (iii) an unsecured, ad-hoc liquidity absorption and provision facility, for maturities ranging from 1 to 28 days, to address sharp and unanticipated changes in liquidity conditions; and (iv) a structural operation, which implies a non-reversible, ad hoc provision of liquidity by the BNA against eligible securities (government securities with residual maturities of less than 3 months).

The BNA has also adopted lender of last resort facilities. They include: (i) the rediscount facility of first level, targeting financial institutions facing cash flow imbalances; and (ii) the rediscount facility of second level, for financial institutions facing restructuring needs.

  • The new framework introduces the BNA’s “reference rate” as a key monetary policy signal. The permanent liquidity facility rate is set at a spread around the BNA rate.

  • To formalize and strengthen analysis on developments in the financial sector and to improve communication with the market, the BNA has created a Monetary Policy Committee. The Committee is now disseminating regular information on monetary conditions and the inflation outlook.

28. The BNA is also actively pursuing de-dollarization. To this end, it has strengthened prudential regulation for short-term credit denominated in foreign currency, particularly for consumer credit affected by repayment problems, and required tighter net open currency positions for banks.

29. Despite these efforts, a number of factors limit effective monetary policy transmission. Shallow markets for government securities, limited interbank and secondary markets, and chronic excess liquidity hamper the transmission mechanism. Structural excess liquidity, induced by the paucity of bankable projects, tends to put all banks on the same side in both money markets and government securities markets, limits interbank market transactions, and results in large holdings of foreign assets. In this environment, the impact of central bank policy rates on lending rates and credit growth is limited.

30. The implementation of the new foreign exchange law will add another layer of complexity going forward. The new law mandates oil companies to shift, by end-2013, a large share of their financial transactions from offshore to domestic banks. This law may increase the scope for financial intermediation and serve as a channel for innovation. However, it may also result in a rapid expansion of banks’ balance sheets and create the basis for excessive risk taking and a credit boom.

31. In terms of outcomes, while inflation is currently on a slow downward trajectory, it remains in double-digit territory. Inflationary pressures could reemerge if high growth rates of broad money and credit were to persist or if a credit boom were to follow the implementation of the new foreign exchange law. The ongoing drought could also exert some upward pressure on food prices.

32. Bringing inflation down to 10 percent by end-2012 is still feasible but requires a guarded policy stance. Sustained disinflation in the period ahead would require a relatively tight monetary policy stance. This would be supported by decisive actions to address structural bottlenecks that keep inflation expectations high by exerting upward pressure on production and distribution costs and magnify the inertial impact of shocks on prices (Appendix 3).

33. While recognizing the difficulties involved, staff sees the case for a tighter monetary policy stance, and for resolute action to strengthen financial stability.

  • An early tightening of monetary policy conditions is warranted. Continued conditions of excess liquidity are not compatible with reaching low inflation rates and, if perceived as persistent by markets, risk undermining the credibility of the monetary authorities. The BNA should use central bank bills to mop up excess liquidity and gradually move real interest rates into positive territory.5 The BNA could also equalize reserve requirements on foreign currency deposits (currently at 15 percent) to the higher level required for domestic currency deposits (currently at 20 percent), and prepare to scale up liquidity management and payments operations to prevent unwanted effects from the new law.

  • A significant strengthening of prudential supervision is essential for two reasons: first, it is imperative to maintain financial stability; second, it is a precondition for the safe implementation of the new law. Given the limited supervisory capacity at present6 , finalizing the implementation of the law by late 2013 may be too ambitious.

  • Strengthening capital buffers should be the priority instrument to address vulnerabilities in the banking sector (Paragraph 37).

Authorities’ Views

34. The authorities underscored the strong reform momentum focused on upgrading the operational framework for monetary policy. They are confident that they are now better equipped to manage liquidity conditions, to enhance the working of the interbank market, and the setting of interbank rates. The BNA also underscored the importance of having enhanced communication with market participants on monetary conditions and the inflation outlook, and is stepping up its analytical capacity in this area.

35. The authorities see limited room for decisive monetary policy action. They see structural bottlenecks in inflation determination and the still incomplete recovery of the banking sector from the impact of the 2009 crisis as limiting the BNA’s room for maneuver. Some banks are still heavily exposed to short-term lending to the construction sector, and the authorities are concerned that the quality of this portfolio may further deteriorate if the global crisis deepens. Given that inflation is on a declining path, the authorities view risks to the financial system as more important. However, if inflation were to pick-up significantly, the authorities stand ready to tighten monetary policy in response.

C. Financial Sector Policy

36. The recent FSAP found that Angola’s financial sector faces vulnerabilities given the risky environment in which it operates:

  • An overarching weakness is the limited capacity in banking supervision, notably the lack of enforcement of the prudential framework (including the timely reporting of reliable data by banks for supervision purposes).7

  • The legal framework for secured lending is inadequate. There are serious impediments to the enforcement of property laws and critical gaps in the secured lending regime for movable asset lending.

  • Dollarization is still high, albeit declining recently; going forward, the new foreign exchange law may push dollarization to higher levels.

  • The financial system is subject to large liquidity shifts linked to oil sector transactions.

  • Stress tests indicate vulnerability to macroeconomic shocks and the need to strengthen the capital position of some banks.

37. Cross-border bank foreign ownership links add another potential layer of risks. Foreign owned banks, particularly Portuguese banks, have a major presence in the banking sector: nine out of 22 commercial banks are foreign owned, and account for about 40 percent of the assets, loans, deposits, and capital of the system. In turn, local subsidiaries tend to deposit in parent banks part of their excess liquidity. This channel makes Angola vulnerable to cross-border contagion in the event of renewed financial turmoil in Europe.

38. The FSAP elaborated priority recommendations to reduce vulnerabilities to these risks. They include:

  • Enhancing supervisory capacity, including through targeted training and recruitment, and strengthened cooperation with cross-border supervisors.

  • Strengthening the enforcement of prudential standards and creditor rights.

  • Being proactive in promoting stronger banks’ capital buffers and in ensuring that banks fully recognize non-performing loans and adequately provision for them.

  • Developing a strategic sovereign asset-liability framework, including a stabilization fund to insulate the economy from volatile oil flows.

39. Creating the conditions for sustainable financial sector development requires urgent, but sustained policy action. The first and most urgent priority is strengthening supervisory capacity and prudential enforcement. This said, the reform momentum must continue through a comprehensive, multi-year financial sector development strategy. Given existing capacity constraints, it will be critical that the authorities work closely with international partners and TA providers to create those conditions.

40. Angola also needs to address the remaining deficiencies in its anti-money laundering and combating the financing of terrorism (AML/CFT) regime. This hinders the banking sector’s ability to engage in cross-border activities and may undermine efforts to attract top-tier international banks into the domestic market.

41. To further financial integration, staff encourages a further liberalization of the foreign exchange regime. Angola’s recovery from the 2009 crisis and its environment appear to support a move towards acceptance of the obligations under Article VIII, Section 2(a), 3 and 4 (Appendix 5). The Fund could provide technical assistance support on exchange system issues.

Authorities’ Views

42. The authorities agreed with the thrust of the FSAP’s key findings and recommendations. They concur that these recommendations would enable a greater contribution of the financial sector to the economy’s transformation, and allow higher access to finance for sectors that have until now been largely excluded (e.g. agriculture).

43. The BNA agrees that strengthening supervision is a priority, and is fast-tracking reforms in this area. The authorities intend to use the FSAP recommendations to frame their multi-year development plan. In this context, the BNA is undergoing a complete restructuring of its supervision department and is hiring additional staff (including with international expertise). Commercial banks are revamping their internal risk assessment and tightening collateral standards (particular in real estate).

44. Nonetheless, the authorities were of the view that the timetable for implementing the new foreign exchange law allows for sufficient time to strengthen banking supervision capacity.

45. They agreed that enhancing capacity to monitor the impact of the ongoing crisis in Europe on Angola’s financial sector is a priority. The BNA has signed a Memorandum of Understanding to step-up cooperation with cross-border supervisors (Portugal). It has also established a Financial Stability Committee, chaired by the Governor, to enhance analysis of systemic risks.

46. The authorities stressed that they are taking steps to comply with the international AML/CFT standards. In June 2010, in collaboration with the Financial Action Task Force (FATF), Angola developed an action plan to address the serious deficiencies that were identified. The authorities reported that Angola has been granted full membership effective August 2012 in the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), the FATF-style regional body (FSRB).

Enabling Structural Transformation

47. The authorities’ priorities include pursuing a structural reform agenda to support broad-based, more inclusive growth. In the decade following the end of the civil war, real growth averaged more than 10 percent per year and progress was made on a variety of fronts– yet Angola still ranks 148 out of 187 countries on the Human Development Index. Three quarters of GDP is concentrated in Luanda, the oil sector is an enclave, and the public sector dominates the economic sphere. To address these challenges, the government has formulated an ambitious long-term development strategy, “Angola 2025.”

48. Competitiveness of the non-oil sector has remained subdued. In recent years, the non-oil export sector may have been hurt by real exchange rate appreciation. Three of the four CGER methods suggest an overvaluation of the Kwanza, but the estimates are very imprecise. The competitiveness problem is exacerbated by substantial costs associated with limited infrastructure, low availability of human capital, and the difficultly of doing business in Angola (Appendix 3).

49. Enabling the structural transformation of the Angolan economy will require a shift in the focus of economic policies from the public to the private sector, and efforts to diversify the economy. Sustained efforts to reduce production and distribution costs are needed to improve competitiveness, accelerate the structural transformation, and unlock Angola’s economic potential. Staff supports the government’s strategy, which emphasizes:

  • Removing infrastructure bottlenecks. Limited access to roads, power, and water weigh heavily on the cost of doing business in Angola. Efforts underway to modernize the operations of the Port of Luanda, repair and extend the road and railway network, and increase investment in power generation and water distribution will strengthen the basis for sustainable medium-term growth. The success of large, multiyear investment projects depends on stable financing, and improved appraisal and implementation capacity.

  • Improving human capital. A rebalancing of the budget toward social and infrastructure spending should be the hallmark of the 2013 budget and beyond. Additional efforts to foster quality vocational training and secondary education are needed to improve, over time, the skills facilitating private and public sector employment, and increase labor productivity.

  • Enhancing the regulatory and legal framework. Complying with international legal standards will provide a strong signal to foreign investors of Angola’s commitment to reform.

Ease of Doing Business: Selected Indicators1

Source: WB, 2012 Doing Business Indicators.

1 Higher score indicates lower rank.

Post-Program Monitoring

50. The results of the staff’s post-program monitoring (PPM) are satisfactory. Angola will remain under PPM until its outstanding credit from the IMF, now 300 percent of quota, drops below the 200 percent threshold. Staff assessed the implications of economic developments and policies for Angola’s capacity to repay the Fund, and is of the view that based on current economic policies, the medium-term development strategy, and debt indicators, Angola’s capacity to repay the Fund remains strong (Table 8). For instance, debt service to the Fund will remain below 0.3 percent of exports, and the total stock of outstanding Fund credit below 4 percent of international reserves.

Table 1.Angola: Main Economic Indicators, 2009–20131
Real economy (percent change, except where noted)
Real gross domestic product2.
Oil sector−5.1−3.0−
Non-oil sector8.
Nominal gross domestic product−5.226.629.011.47.9
Oil sector−25.427.636.73.3−1.9
Non-oil sector21.125.722.818.815.5
GDP deflator−7.422.424.24.32.7
Non-oil GDP deflator12.116.812.212.18.8
Consumer prices (annual average)13.714.513.510.88.6
Consumer prices (end of period)14.015.311.49.67.5
Gross domestic product (billions of kwanzas)5,9897,5809,78010,89711,753
Oil gross domestic product (billions of kwanzas)2,6623,3964,6414,7924,703
Non-oil gross domestic product (billions of kwanzas)3,3274,1845,1396,1057,051
Gross domestic product (billions of U.S. dollars)75.582.5104.3112.7118.0
Gross domestic product per capita (U.S. dollars)4,0824,3295,3145,5765,668
Central government (percent of GDP)
Total revenue34.543.548.844.941.3
Of which: Oil-related24.
Of which: Non-oil tax9.
Total expenditure44.238.238.638.839.6
Current expenditure31.728.529.929.829.6
Capital expenditure12.
Overall fiscal balance (budget basis)−9.65.310.26.11.7
Non-oil primary fiscal balance (budget basis)−32.1−24.3−25.3−24.9−24.9
Non-oil primary fiscal balance/Non-oil GDP−57.7−44.1−48.2−44.5−41.5
Money and credit (end of period, percent change)
Broad money (M2)62.614.033.515.339.5
Percent of GDP38.534.635.937.148.0
Velocity (GDP/M2)
Velocity (non-oil GDP/M2)
Credit to the private sector (12-month percent change)59.525.030.320.315.9
Balance of payments
Trade balance (percent of GDP)
Exports of goods, f.o.b. (percent of GDP)54.261.464.559.554.4
Of which: Oil exports (percent of GDP)52.959.963.058.353.1
Imports of goods, f.o.b. (percent of GDP)
Terms of trade (percent change)−28.319.624.1−4.0−7.0
Current account balance (percent of GDP)−
Gross international reserves (end of period, millions of U.S. dollars)13,12619,22627,48331,03134,416
Gross international reserves (months of imports)
Net international reserves (end of period, millions of U.S. dollars)12,62117,32725,17128,71932,104
Exchange rate
Official exchange rate (average, kwanzas per U.S. dollar)79.391.993.8
Official exchange rate (end of period, kwanzas per U.S. dollar)89.492.695.3
Nominal effective exchange rate change (depreciation -)0.5−15.9−5.6
Real effective exchange rate (depreciation -)12.6−5.75.4
Debt (percent of GDP)
External public sector debt (including IMF)20.121.719.719.520.4
Total public sector debt (gross), external+domestic36.437.631.528.530.6
Oil production (millions of barrels per day)1.8091.7551.6601.8011.855
Oil and gas exports (billions of U.S. dollars)39.949.465.765.762.7
Angola oil price (average, U.S. dollars per barrel)60.977.8110.3101.894.2
WEO oil price (average, U.S. dollars per barrel)61.879.0104.0101.894.2
Sources: Angolan authorities; and Fund staff estimates and projections.
Table 2a.Angola: Fiscal Operations of the Central Government, 2009–2013(Billions of local currency)
Revenue and grants2,0703,2954,7764,8924,852
Tax revenue1,9883,0944,5284,6954,624
Expenditures and net lending2,5102,8753,7754,2234,654
Current expenditures1,7672,1422,9283,2423,478
Wages and salaries6657148771,0611,242
Goods and services23836191,0311,1531,241
Transfers and subsidies2615720926917874
Of which: Subsidies308507766718654
Interest payments1039095111121
Capital expenditure27437338469811,175
Foreign financed226154186266253
Domestic financed518580660714923
Overall balance (budget basis)−4404201,001669198
Change in payment arrears (net)−75−115200
Domestic (net)−39−115200
Payables (net)337−2983200
Receivables (net)−37629712000
External (net)−360000
Overall balance (cash basis)−5164191,153669198
Oil bonuses0001450
External financing (net)95−15−95−581−22
Government deposits abroad−16−31−145−122−100
Other accounts to pay00000
Domestic financing (net)420−404−1,059−756−177
Monetary sector681−321−780−551−177
Claims on the central bank662−271−698−388−394
Claims on deposit money banks19−49−82−163218
Non-Monetary sector−239−81−237−2040
Of which: Arrears repayment00−203−860
Unexplained residual−22−2−4100
Memorandum items:
Residual (share of total expenditure)−0.9−0.1−
Residual (percent of GDP)−0.40.0−
Social expenditures7607721,2711,2671,396
Non-oil balance (budget basis)−1,890−1,914−2,570−2,830−3,048
Non-oil primary balance−1,787−1,825−2,475−2,719−2,928
Percent of non-oil GDP−53.7−43.6−48.2−44.5−41.5
Non-oil revenue6187939571,1391,359
Percent of non-oil GDP18.619.018.618.719.3
Angola oil price (average, U.S. dollars per barrel)60.977.8110.3101.894.2
Gross government deposits3406111,3421,7312,125
Deposits in months of domestically-financed expenditure1.
Public sector debt (gross), face value2,1832,8523,0783,1053,602
Domestic public sector debt9761,2111,1569831,200
External public sector debt1,2071,6411,9222,1232,402
Sources: Angolan authorities; and Fund staff estimates and projections.
Table 2b.Angola: Fiscal Operations of the Central Government, 2009–2013(Percent of GDP)
Revenue and grants34.643.548.844.941.3
Tax revenue33.240.846.343.139.3
Expenditures and net lending41.937.938.638.839.6
Current expenditures29.528.329.929.829.6
Wages and salaries11.
Goods and services26.48.210.510.610.6
Transfers and subsidies210.
Of which: Subsidies5.
Interest payments1.
Capital expenditure212.
Foreign financed3.
Domestic financed8.
Overall balance (budget basis)−7.45.510.26.11.7
Change in payment arrears (net)−
Domestic (net)−
Payables (net)5.6−
Receivables (net)−
External (net)−
Overall balance (cash basis)−8.65.511.86.11.7
Oil bonuses0.
External financing (net)1.6−0.2−1.0−0.5−0.2
Government deposits abroad−0.3−0.4−1.5−1.1−0.9
Other accounts to pay0.
Domestic financing (net)7.0−5.3−10.8−6.9−1.5
Monetary sector11.4−4.2−8.0−5.1−1.5
Claims on the central bank11.1−3.6−7.1−3.6−3.4
Claims on deposit money banks0.3−0.7−0.8−1.51.9
Non-Monetary sector−4.0−1.1−2.4−1.90.0
Of which: Arrears repayment0.00.0−2.1−0.80.0
Unexplained residual−0.40.0−
Memorandum items:
Social expenditures/GDP12.710.213.011.611.9
Non-oil balance (budget basis)/Non-oil GDP−56.8−45.8−50.0−46.4−43.2
Non-oil primary balance/Non-oil GDP−53.7−43.6−48.2−44.5−41.5
Non-oil tax revenue/Non-oil GDP16.214.213.815.416.1
Public sector debt (gross)/GDP, face value36.437.631.528.530.6
Domestic public sector debt/GDP16.316.
External public sector debt/GDP20.121.719.719.520.4
Non-oil GDP (billions of kwanzas)3,3274,1845,1396,1057,051
GDP (billions of kwanzas)5,9897,5809,78010,89711,753
Sources: Angolan authorities; and Fund staff estimates and projections.
Table 2c.Angola: Fiscal Operations of the Central Government, 2009–2013(Percent of non-oil GDP)
Revenue and grants62.278.892.980.168.8
Tax revenue59.874.088.176.965.6
Expenditures and net lending75.468.773.469.266.0
Current expenditures53.
Wages and salaries20.
Goods and services211.514.820.118.917.6
Transfers and subsidies218.517.
Of which: Subsidies9.312.114.911.89.3
Interest payments3.
Capital expenditure222.317.516.516.116.7
Foreign financed6.
Domestic financed15.613.912.811.713.1
Overall balance (budget basis)−
Change in payment arrears (net)−
Domestic (net)−
Payables (net)10.1−
Receivables (net)−
External (net)−
Overall balance (cash basis)−15.510.022.411.02.8
Oil bonuses0.
External financing (net)2.9−0.4−1.8−1.0−0.3
Government deposits abroad−0.5−0.7−2.8−2.0−1.4
Other accounts to pay0.
Domestic financing (net)12.6−9.6−20.6−12.4−2.5
Monetary sector20.5−7.7−15.2−9.0−2.5
Claims on the central bank19.9−6.5−13.6−6.4−5.6
Claims on deposit money banks0.6−1.2−1.6−2.73.1
Non-Monetary sector−7.2−1.9−4.6−3.30.0
Of which: Arrears repayment0.00.0−3.9−1.40.0
Unexplained residual−0.60.0−
Memorandum items:
Social expenditures22.818.424.720.719.8
Non-oil balance (budget basis)−56.8−45.8−50.0−46.4−43.2
Non-oil primary balance−53.7−43.6−48.2−44.5−41.5
Non-oil revenue18.619.018.618.719.3
Public sector debt (gross), face value65.668.259.950.951.1
Domestic public sector debt29.328.922.516.117.0
External public sector debt36.339.237.434.834.1
Non-oil GDP (billions of kwanzas)3,3274,1845,1396,1057,051
Sources: Angolan authorities; and Fund staff estimates and projections.
Table 2d.Angola: Statement of Central Government Operations, 2007–2013 (GFSM2001)(Billions of local currency)
Social contributions489316769072110
Other revenue215263123156125117
Compensation of employees3655436657148771,0611,242
Use of goods and services3445393836191,0311,1531,241
Other expense396958307213159199219
Of which: Transfers to Sonangol341898294163000
Net acquisition of nonfinancial assets5318937437338469811,175
Domestic financed19698518580660714923
Foreign financed512195226154186266253
Net lending (+)/ borrowing (−)216−281−4404201,001669198
Statistical Discrepancy333−22−2−4100
Net acquisition of financial assets (+: increase)390847−14432809416494
Cash and deposits134457−535298785438394
Equity and investment fund shares1400−10−1450
Other accounts receivable129294376−297−12000
Currency and deposits114961631145122100
Net incurrence of liabilities (+: increase)1401,128318−386−150−253296
Debt securities138660−890−186−229218
Of which: Debt regularization securities0000−203−860
Other accounts payable−94211337−2983200
Debt securities15931411116516478
Other accounts payable2312−360000
Memorandum items:
Statistical discrepancy (share of total expenditure)1.70.1−0.9−0.1−
Statistical discrepancy (percent of GDP)0.70.0−0.40.0−
Overall balance (cash basis)17−352−5164191,153669198
Non-oil balance (budget basis)−1,506−2,883−1,890−1,914−2,570−2,830−3,048
Non-oil primary balance−1,452−2,761−1,787−1,825−2,475−2,719−2,928
Percent of non-oil GDP−69.2−100.5−53.7−43.6−48.2−44.5−41.5
Non-oil revenue4006146187939571,1391,359
Percent of non-oil GDP19.122.318.619.018.618.719.3
Angola oil price (average, U.S. dollars per barrel)72.493.960.977.8110.3101.894.2
Gross government deposits4899653406111,3421,7312,125
Deposits in months of domestically-financed expenditure4.
Net credit to government provided by monetary sector6152681−321−780−551−177
Social expenditures5697437607721,2711,2671,396
Public sector debt (gross), face value9921,9972,1832,8523,0783,1053,602
Domestic public sector debt2319479761,2111,1569831,200
External public sector debt7621,0501,2071,6411,9222,1232,402
Sources: Angolan authorities; and Fund staff estimates and projections.
Table 2e.Angola: Statement of Central Government Operations, 2009–2013 (GFSM2001)(Percent of non-oil GDP)
Social contributions2.
Other revenue1.
Compensation of employees17.419.820.
Use of goods and services16.419.611.514.820.118.917.6
Other expense18.834.
Of which: Transfers to Sonangol16.
Net acquisition of nonfinancial assets25.332.522.317.516.516.116.7
Domestic financed0.925.415.613.912.811.713.1
Foreign financed24.
Net lending (+)/ borrowing (−)10.3−10.2−
Statistical Discrepancy1.60.1−0.60.0−
Net acquisition of financial assets (+: increase)18.630.8−4.30.815.76.87.0
Cash and deposits6.416.6−
Equity and investment fund shares0.−2.40.0
Other accounts receivable6.110.711.3−7.1−
Currency and deposits5.
Net incurrence of liabilities (+: increase)6.741.19.5−9.2−2.9−4.14.2
Debt securities6.624.0−2.70.0−3.6−3.73.1
Of which: Debt regularization securities0.−3.9−1.40.0
Other accounts payable−4.57.710.1−
Debt securities7.611.
Other accounts payable1.10.4−
Memorandum items:
Overall balance (cash basis)0.8−12.8−15.510.022.411.02.8
Non-oil balance (budget basis)−71.7−105.0−56.8−45.8−50.0−46.4−43.2
Non-oil primary balance−69.2−100.5−53.7−43.6−48.2−44.5−41.5
Non-oil revenue19.122.318.619.018.618.719.3
Net credit to government provided by monetary sector0.35.520.5−7.7−15.2−9.0−2.5
Social expenditures27.127.122.818.424.720.719.8
Public sector debt (gross), face value47.372.765.668.259.950.951.1
Domestic public debt11.034.529.328.922.516.117.0
External public debt36.338.236.339.237.434.834.1
Sources: Angolan authorities; and Fund staff estimates and projections.
Table 3.Angola: Monetary Accounts, 2009–20131(Billions of local currency; unless otherwise indicated)
I. Monetary Survey
Net foreign assets1,1291,6982,8913,7544,904
Net domestic assets1,4191,031765440886
Claims on central government (net)41797−684−1,449−1,408
Claims on other public sector 2/669592109126
Claims on private sector1,2671,5832,0622,4822,877
Other items (net) 2−434−885−885−916−956
Broad money (M3)2,5482,7283,6564,1935,790
Money and quasi-money (M2)2,3042,6263,5064,0435,641
Curency outside banks170172209237325
Demand deposits, local currency6097339561,0881,490
Time and savings deposits, local currency260409596678929
Foreign currency deposits1,2651,3121,7452,0402,897
Money management instruments and other liabilities244102150150150
II. Monetary Authorities
Net foreign assets1,1271,6832,5683,0203,399
Net international reserves1,1281,6052,3982,8453,219
Other foreign assets (net)−278169174180
Net domestic assets−423−841−1,599−2,014−2,168
Claims on other depository corporations853885102117
Claims on central government (net)−272−543−1,241−1,661−1,605
Claims on other public sector 310000
Claims on private sector22000
Other items (net) 2−93−56−271−348−439
BNA Bills held by commercial banks−146−281−172−107−241
Reserve money7048439681,0051,231
Currency outside banks214229288326447
Commercial bank deposits490613681679784
Memorandum items:
Reserve money (percent change)75.219.614.93.822.5
Broad money (M3) (percent change)
Money and quasi-money (M2) (percent change)62.614.033.515.339.5
Claims on private sector (percent change)59.525.030.320.315.9
M2-to-GDP ratio (in percent)42.536.035.937.148.0
M2-to-non-oil GDP ratio (in percent)69.262.868.266.280.0
Money multiplier (M2/reserve money)
Velocity (GDP/M2)
Velocity (non-oil GDP/M2)
Credit to the private sector (in percent of GDP)21.220.921.122.824.5
Real credit to the private sector (percent change)39.98.416.99.87.8
Foreign currency deposits (share of total deposits)59.353.452.953.654.5
FX credit to the private sector (share of total claims to private sector)63.864.450.550.049.5
Sources: Angolan authorities; and Fund staff estimates and projections.
Table 4.Balance of Payments, 2009–2017(Millions of U.S. dollars; unless otherwise indicated)
Current account−7,4517,44210,0238,2785,1703,319745−2,198−4,719
Trade balance18,28833,94947,00444,48639,64737,90136,33334,17332,536
Exports, f.o.b.40,94850,61667,23367,06064,14464,42965,41566,02767,685
Crude oil39,39148,65064,68464,77961,71861,85662,70263,16564,654
Refined oil products and gas5327221,0529259821,0341,0731,1151,168
Imports, f.o.b−22,660−16,667−20,228−22,574−24,497−26,529−29,082−31,854−35,149
Oil sector−4,326−3,158−5,209−5,269−5,441−5,998−6,679−7,364−8,274
Non-oil sector−18,334−13,508−15,019−17,305−19,056−20,531−22,403−24,490−26,875
Services (net)−18,546−17,897−24,405−24,302−23,068−23,087−23,868−24,490−25,030
Of which: Oil sector−12,345−11,000−14,625−14,646−13,954−13,986−14,677−15,285−15,645
Income (net)−6,823−8,172−12,101−11,388−10,945−11,029−11,247−11,404−11,735
Of which: Oil sector−6,263−7,521−11,249−10,861−10,348−10,371−10,513−10,591−10,840
Transfers (net)−370−438−475−518−464−465−473−476−489
Official transfers27−4316383939393939
Other transfers−397−395−528−529−503−504−511−515−528
Of which: Workers’ remittances−395−393−528−529−503−504−511−515−528
Capital and financial account2,113−542−1,578−4,593−2,050−1,1331,4292,1963,619
Capital account111134132479
Financial account2,102−543−1,713−4,594−2,053−1,1351,4262,1893,610
Foreign direct investment2,199−4,568−3,974−3,0775978481,8922,0832,685
In reporting economy12,205−3,227−2,662−1,3751,3451,6032,4052,4052,886
Portfolio investment−490−271−1,209−1,208−1,153−1,156−1,173−982−506
Other investment3934,2953,470−309−1,497−8277061,0881,430
Trade credits−2,063−2,089−1,505−1,189−1,207−1,259−1,195−953−1,018
Currency and deposits−5446,3233,162−1,092−1,529−1,484−1,355−1,166−894
Medium and long-term loans8132,8952,4611,2132,1542,0862,7523,0742,569
Of which: Central government (net)1,3991735426607871,1551,6472,0821,548
Of which: Other sectors (net)2−7512,0821,9195531,3679311,1059921,021
Short-term loans1,818−1,3980000000
Errors and omissions589−2010000000
Overall balance−4,7506,6998,4453,6853,1202,1862,175−1−1,100
Net international reserves of the monetary4,340−6,630−8,575−3,685−3,120−2,186−2,17511,100
authorities (increase -)
Of which: Use of Fund credit−367−530−318−1372655413971210
Exceptional financing3409−69130000000
Memorandum items:
Current account (percent of GDP)−−1.5−3.1
Goods and services balance (percent of GDP)−0.319.521.717.914.
Trade balance (percent of GDP)
Capital and financial account (percent of GDP)2.8−0.7−1.6−4.1−1.7−
Overall balance (percent of GDP)−−0.7
Official grants (percent of GDP)0.0−
Exports of goods, f.o.b. (percent change)−37.423.632.8−0.3−
Of which: Oil exports (percent change)−37.623.733.10.0−
Imports of goods, f.o.b. (percent change)8.0−26.421.411.
Terms of trade (percent change)−28.319.624.1−4.0−7.0−1.5−0.4−1.9−0.7
Exports of goods, f.o.b. (share of GDP)54.261.464.559.554.451.548.746.144.1
Imports of goods, f.o.b. (share of GDP)
Gross international reserves
Millions of U.S. dollars13,12619,22627,48331,03134,41637,14339,71539,83538,736
Months of imports4.
Official exchange rate (average, kwanzas per U.S. dollar)79.391.993.8
Sources: Angolan authorities; and Fund staff estimates and projections.
Table 5.Angola: Medium-Term Scenario, 2009–20171
Real economy (percent change, except where noted)
Real gross domestic product2.
Oil sector−5.1−3.0−
Non-oil sector8.
Nominal gross domestic product−5.226.629.
Oil sector−25.427.636.73.3−
Non-oil sector21.125.722.818.815.513.012.812.011.4
GDP deflator−7.422.424.
Non-oil GDP deflator12.116.812.
Consumer prices (annual average)13.714.513.510.
Consumer prices (end of period)14.015.311.
Gross domestic product (billions of kwanzas)5,9897,5809,78010,89711,75312,82413,98315,14816,468
Oil gross domestic product (billions of kwanzas)2,6623,3964,6414,7924,7034,8544,9955,0835,256
Non-oil gross domestic product (billions of kwanzas)3,3274,1845,1396,1057,0517,9698,98810,06511,212
Gross domestic product (billions of U.S. dollars)75.582.5104.3112.7118.0125.0134.3143.3153.5
Gross domestic product per capita (U.S. dollars)4,0824,3295,3145,5765,6685,8306,0806,3006,463
Central government (percent of GDP)
Total revenue34.543.548.844.941.340.639.938.538.8
Of which: Oil-related24.
Of which: Non-oil tax9.
Total expenditure44.238.238.638.839.639.839.940.641.3
Current expenditure31.728.529.929.829.629.328.929.129.3
Capital expenditure12.
Overall fiscal balance (budget basis)−9.65.310.−2.1−2.5
Non-oil primary fiscal balance (budget basis)−32.1−24.3−25.3−24.9−24.9−24.2−23.5−23.2−23.0
Non-oil primary balance/Non-oil GDP−57.7−44.1−48.2−44.5−41.5−39.0−36.5−35.0−33.7
Money and credit (end of period, percent change)
Broad money (M2)62.614.033.515.339.521.313.312.011.7
Percent of GDP38.534.635.937.148.053.355.457.358.8
Velocity (GDP/M2)
Velocity (non-oil GDP/M2)
Credit to the private sector
12-month percent change59.525.030.320.315.914.213.812.612.3
Percent of GDP21.220.921.122.824.525.626.827.828.7
Percent of non-oil GDP38.137.840.140.640.841.241.641.942.2
Balance of payments
Trade balance (percent of GDP)
Exports, f.o.b. (percent of GDP)54.261.464.559.554.451.548.746.144.1
Of which: Oil exports (percent of GDP)52.959.963.058.353.150.347.544.942.9
Imports, f.o.b. (percent of GDP)
Terms of trade (percent change)−28.319.624.1−4.0−7.0−1.5−0.4−1.9−0.7
Current account balance (percent of GDP)−−1.5−3.1
Gross international reserves (end of period, millions of U.S. dollars)13,12619,22627,48331,03134,41637,14339,71539,83538,736
Gross international reserves (months of imports)
Exchange rate
Official exchange rate (average, kwanzas per U.S. dollar)79.391.993.8
Official exchange rate (end of period, kwanzas per U.S. dollar)89.492.695.3
Nominal effective exchange rate change (depreciation -)0.5−15.9−5.6
Real effective exchange rate (depreciation -)12.6−5.75.4
Debt (percent of GDP)
External public sector debt (including IMF)20.121.719.719.520.421.021.622.522.7
Total public sector debt (gross)36.437.631.528.530.632.133.935.836.9
Oil production (millions of barrels per day)1.8091.7551.6601.8011.8551.9111.9682.0172.068
Oil and gas exports (billions of U.S. dollars)39.949.465.765.762.762.963.864.365.8
Angola oil price (average, U.S. dollars per barrel)60.977.8110.3101.894.291.690.288.287.6
WEO oil price (average, U.S. dollars per barrel)61.879.0104.0101.894.291.690.288.287.6
Sources: Angolan authorities; and Fund staff estimates and projections.
Table 6.Angola: External and Public Debt, 2009–2013
Debt (Billions of U.S. dollars)
Total private debtn.a.n.a.n.a.n.a.n.a.
Total public debt27.531.032.832.136.2
Medium and long-term25.327.
Medium and long-term10.
Owed to: Commercial banks8.29.911.913.315.3
Owed to: Official creditors6.
Of which: IMF credit0.
Owed to: Other private sector0.
Medium and long-term15.017.720.421.924.1
Of which: Sonangol5.37.49.610.211.5
Debt (Percent of GDP)
Total private debtn.a.n.a.n.a.n.a.n.a.
Total public debt36.437.631.528.530.6
Medium and long-term33.532.927.925.927.3
Medium and long-term13.611.
Owed to: Commercial banks10.912.011.411.813.0
Owed to: Official creditors8.
Of which: IMF credit0.
Owed to: Other private sector1.
Medium and long-term19.921.519.519.520.4
Of which: Sonangol7.
Source: Angolan authorities and IMF staff estimates.
Table 7.Angola: Indicators of Capacity to Repay the Fund, 2009–2016(Million of SDRs, unless otherwise indicated)
Stock of outstanding use of Fund resources229.0572.6773.0858.9687.1357.9110.910.7
Memorandum items:
Debt service (percent)
Payments to the Fund/Exports0.
Payments to the Fund/Quota0.
Payments to the Fund/GDP0.
Payments to the Fund/Reserves0.
Outstanding use of Fund resources (percent)
Outstanding UFR/Exports0.
Outstanding UFR/Quota80.0200.0270.0300.0240.0125.038.73.7
Outstanding UFR/GDP0.
Outstanding UFR/Reserves2.
Source: IMF staff estimates.
Table 8.Angola: Financial Soundness Indicators 2003–March 2012(Percent at end of period)
200320042005200620072008200920102011March 2012
Capital adequacy
Regulatory capital to risk-weighted assets18.119.619.418.521.919.519.516.414.819.2
Capital (net worth) to risk-weighted assets11.813.516.115.315.016.014.713.714.414.8
Asset quality
Foreign exchange loans to total loans27.855.772.771.469.961.965.363.950.950.5
Nonperforming loans to gross loans9.
Provisions as percent of capital (net worth)
Sectoral distribution of credits
Credit to public sector to total credit7.
Credit to private sector to total credit92.394.789.192.691.989.990.694.094.696.3
Net profit
Return on assets (ROA)
Return on equity (ROE)27.024.334.228.823.626.536.527.524.24.7
Lending rate minus demand deposit rates71.162.632.318.
Saving deposit rates47.
Interest margin to gross income103.8116.358.647.456.156.926.768.866.964.3
Liquid assets/total assets97.063.947.134.434.242.631.432.028.327.6
Liquid assets/short term liabilities85.378.584.159.863.193.156.939.430.330.6
Foreign exchange liabilities/total liabilities46.545.
Sensitivity to market risk
Net open position in foreign exchange to capital41.664.153.174.3433.045.588.826.626.4−1.0
Source: BNA’s Banking Supervision Directorate.

Staff Appraisal

Having made considerable progress in the stabilization of the economy in the context of the Stand-By Arrangement, the authorities are turning their attention to medium-term policies. Staff fully supports this reorientation of the policy priorities.

51. Robust growth in 2012 and beyond will likely be sustained. Oil prices, though declining, are projected to remain favorable over the medium term and oil production is expected to rebound. Non-oil sector growth is also expected to remain strong, driven by increased public investments to unlock potential in agriculture and commerce.

52. The downside risks to this outlook are nonetheless significant. Advanced economies may continue to experience low growth. This could affect Angola through export prices and demand, and greater investor risk aversion.

53. In this environment, Angola needs to continue building policy buffers, backed by a prudent fiscal stance. After a successful fiscal consolidation –key to Angola’s stabilization after the 2009 crisis—the fiscal stance was loosened toward end-2011. The incorporation of QFOs was also not fully reflected in the 2012 budget, which has become unrealistic. A supplementary budget may be warranted to regularize the situation and avoid new domestic arrears. This budget should seek to put the NOPD back on a declining path (in percent of non-oil GDP) and to rebalance expenditure towards social and infrastructure spending.

54. Initial steps to reorient policy formulation toward medium-term objectives are welcome. Currently, fiscal policy formulation is largely limited to a one year horizon. Given Angola’s high dependence on volatile oil revenues, the adoption of comprehensive medium-term framework, would help to ensure smoother and sustained implementation of infrastructure and social development programs.

55. Efforts to phase-out the QFOs undertaken by Sonangol and to incorporate them in the fiscal accounts should continue. This is essential for an accurate assessment of the fiscal policy stance, and a key pre-requisite for a credible and comprehensive medium-term fiscal framework. Ensuring a predictable path for the transfer of oil revenues from Sonangol to the budget is critical to macroeconomic stability. To this effect, it is unfortunate that the work on the 2007-2010 Reconciliation Report could not be completed within the envisaged timeframe. It is critical that the authorities continue this work in time to be discussed during the second PPM mission.

56. Fully funding OIF will be another key step to protect Angola from future shocks. The OIF should be used as a fiscal buffer. To be effective in this regard, the OIF would need to be fully funded, and withdrawals judiciously managed until absorption capacity is strengthened. This would allow a gradual scaling up of investment, and protect priority projects from detrimental stops and starts. The OIF could also help sterilize liquidity.

57. A prudent level of international reserves is also warranted to support the continuity of import-intensive investments, while the economy remains reliant on a single commodity. The authorities aim at reaching the equivalent of at least 9 months of imports. Given Angola’s dependence on volatile oil revenue, this level appears appropriate, and in combination with the OIF should be sufficient to shield crucial investments from external shocks.

58. Further progress in reducing inflation requires a tighter monetary stance. Inflation has slowly declined, aided by a stable exchange rate. However, it remains in the double-digit territory. To reach its objective of bringing inflation to the single digits by 2013, the BNA should mop up excess liquidity through the issuance of BNA bills, and allow rates to adjust upward.

59. Given the risks identified in the FSAP, the authorities should continue to step-up banking supervision and improve the enforcement of prudential standards and creditor rights. Non-performing loans should be better recognized and adequately provisioned, and bank capital strengthened. The steps taken by the BNA to implement FSAP recommendations and to enhance cooperation with supervisors in Europe are in the right direction.

60. The authorities’ multi-year development agenda will help to realize Angola’s economic potential and improve the living conditions of its population. This will require sustained efforts to (i) improve human and physical capital, by rebalancing budget allocations toward social and infrastructure spending; (ii) lower inflation and sustainable financial sector development; and (iii) a business environment to support a greater role of the private sector in economic development.

61. Staff recommends that Angola remain on the standard 12-month Article IV consultation cycle. The discussion for the second Post Program Monitoring will take place in late 2012.

Appendix I. Investing in Oil Revenue in Angola

The global financial crisis of 2008 precipitated a drop in world oil prices that led many resource rich countries to reassess the management of their resource revenues. Angola is no exception.

1. Expansionary fiscal and monetary policies and an overvalued exchange rate left Angola vulnerable to the collapse of oil prices in the aftermath of the 2008 global financial crisis. In the early years of the 2003-08 oil price boom, Angola saved about 60 percent of the additional oil revenue received (in excess of the budget estimate). But as high oil prices continued, leading to the belief that they were permanent, spending increased sharply. Angola spent 140 percent of additional oil revenue during the period 2006-08, more than most other low- and middle-income oil producers.

2. While Angola is now well on the road to recovery, there is consensus among policymakers and stakeholders that significant challenges persist. Arguably, the most pressing of these challenges is to put in place a fiscal framework to protect public investment spending before another global crisis hits.

3. Resource revenue dependence poses unique challenges because this revenue is temporary, due to exhaustibility, and uncertain, due to commodity price volatility. In a sample of 16 low and lower middle income oil producers, oil revenues in 2002–2012 averaged 19.4 percent of GDP, with a standard deviation of 5.2 percent of GDP. In the case of Angola, oil revenues averaged 33.3 percent of GDP, but with a standard deviation of 6.2 percent of GDP. This higher volatility is because oil revenue in Angola is subject to shocks arising from prices, production, and, unlike most oil producers, from the institutional setting as well.

Use and savings of additional resource revenue

(Percent of additional resource revenue)

4. In infrastructure and capital scarce economies, the volatility of resources can be particularly damaging because it prevents a sustained realization or scaling up of public investment. In Angola, this problem is exacerbated by binding capacity constraints. Therefore, any proposed approach to investing oil revenues needs to be based on a fiscal framework that supports a feasible and sustained scaling up.

5. Adapting the analytical framework in Berg et al. (2012), we consider the macroeconomic effects in Angola of two fiscal mechanisms: spend-as-you-go versus the authorities’ Oil for Infrastructure Fund (OIF) introduced in 2011 (Paragraph 20). We compare Angola’s expected macroeconomic performance under each of the two mechanisms, in light of two oil price scenarios: (i) a baseline scenario based on the current World Economic Outlook forecast, which foresees stable but gradually declining oil prices; and (ii) an oil price shock scenario, based on the magnitude of the shock faced during the 2008-09 crisis (Figure 2).

Figure 2.Angola: Impact of Alternative Fiscal Mechanisms under Baseline and Alternative Oil Price Scenarios, 2011–17

Source: IMF staff calculations and estimates.

6. If faced with an oil price shock, Angola’s macroeconomic performance would be markedly better with a fiscal mechanism building a fiscal buffer to gradually scale-up investment, such as the OIF. Under spend-as-you-go, the country would be vulnerable to a decline in oil revenues of the magnitude faced during the 2008-09 crisis. If such a shock were to hit in the next 3-5 years, Angola’s current low level of fiscal buffers would be quickly depleted and capital spending would be significantly disrupted for years after the new shock. By contrast, under an OIF-like mechanism, Angola would be able to set aside excess revenues in a stabilization fund while gradually scaling up investment. In the event of a repeat of the 2008 oil price shock, investment program could go forth uninterrupted by drawing on the resources set aside in the stabilization fund.

Oil Production and Prices, 2011–2017

Sources: IMF staff estimates (based on WEO Spring 2012).

Oil Revenue, 2011–2017

(Percent of GDP)

Source: IMF staff estimate

7. There are three key takeaway messages from the exercise. First, without fiscal buffers in place, Angola is vulnerable to volatile oil revenue. Investment spending would be significantly disrupted for years after a repeat of the 2008-09 shock. Second, a slower scaling up of investment would allow the OIF to become fully effective. Saving OIF resources to be used during “bad times” would still allow space for a moderate scaling up of investment over the medium-term in line with a build-up of capacity, but also to create the buffers necessary to prevent disruptions to investment in the case of a shock. Three, the results suggest that there is an urgent need to move towards a medium-term planning horizon for fiscal policy. The build-up of buffers needs to begin now to enable Angola to withstand a shock in 3-5 years.

Appendix II. Rewriting Recent Fiscal History

As part of the effort to account for the unexplained residual in the 2007-2010 fiscal accounts, the authorities have embarked on a comprehensive stock-taking exercise. While the work is still in progress, the results are noteworthy.

1. The effort to include Sonangol’s quasi-fiscal operations (QFOs) in the fiscal accounts highlights that significantly higher levels of public spending than previously identified were taking place. Prior to 2009, Angola’s fiscal accounts only included QFOs relating to the provision of fuel price subsidies, fuel supplied to government entities, and concessionaire commissions. Since 2010, more QFOs have been incorporated, related to net proceeds of oil shipments transferred to debt-service escrow accounts abroad used for servicing external credit lines; certain capital expenditures; refinery subsidies; and the provision of services to the government air fleet.

2. The bulk of QFOs incorporated in the fiscal accounts as part of the reconciliation effort relates to goods and services and capital expenditures. This resulted in upward expenditure revisions of up to 14.5 percent of GDP per year. For statistical purposes, in conformity with the Government Finance Statistics Manual (2001), the QFOs are recorded as current transfers, because the transactions were undertaken by Sonangol on behalf of the central government.

3. As a result, the fiscal stance prior to the 2008-09 crisis was much weaker than initially estimated. Initial data had suggested that Angola ran sizable fiscal surpluses during 2007-08. The revised data indicate a much smaller fiscal surplus for 2007 and an overall deficit for 2008. The fiscal balance on a cash basis points to an even weaker fiscal position, due to the accumulation of receivables (oil revenue that had not been transferred from Sonangol to the treasury).

4. Moreover, the magnitude of the fiscal adjustment undertaken in response to the crisis is very large. The non-oil primary deficit (NOPD) shows the extent of fiscal adjustment excluding oil revenue developments. From 2008 to 2009, the NOPD declined from 103 percent of non-oil GDP to 58 percent of non-oil GDP, driven by a reduction in primary expenditure. Non-oil revenue fell by 8 percent of non-oil GDP. When considering the 2007-2010 period, the non-oil primary balance improved by 25.1 percent of non-oil GDP.

Figure 4.Angola: Operations of the Central Government, 2007–2010

Source: Angolan authorities and IMF staff estimates.

Appendix III. Exchange Rate Assessment

1. The official Kwanza exchange rate is determined in the BNA’s daily foreign exchange auctions. The BNA sells to banks part of the foreign exchange received by the government as oil revenue, in order to fund domestic public spending. Concerned about the stability of the Kwanza, the BNA in practice rejects offers significantly above the previous day’s rate. As a result, since early 2010, the rate has moved in the range of 90 to 95 Kwanza per US dollar. The IMF classifies the exchange arrangement as a “pegged exchange within horizontal bands.”

Angola - Exchange Rate Developments


Sources: IFS

Angola - Reserve Developments

(in percent)

Sources: IFS

2. The nominal effective exchange rate (NEER) has mirrored the stability in the Kwanza dollar rate. Due to the inflation differentials with trading partners. The real effective exchange rate (REER) is on an upward trend since 2004, with deviations from this trend closely following the NEER. The REER has appreciated on average by 9¾ percent per year since 2004.

3. Three out of four standard methodologies that the IMF has developed for evaluating exchange rate levels suggest some degree of overvaluation of the Kwanza. These three estimates are in the range of 4 to 42 percent, while a fourth method suggests an undervaluation of about ten percent.1, 2 However, these estimates are very imprecise. None of the methodologies allow for a rejection of the hypothesis that the Kwanza exchange rate is currently at an equilibrium level.

Angola - Estimated Required REER Adjustment

(Required depreciation to reach REER equilibrium under IMF WEO forecast, percent in 2012)

Source: IMF staff estimates.

1 No confidence bands available for the ES approach.

4. Other evidence point to inadequate competitiveness.3 Structural bottlenecks hamper competitiveness by increasing domestic price levels. Such bottlenecks include: severe infrastructure limitations, disruption to production processes due to power constraints, limited availability of skilled labor, uncompetitive markets with limited contestability, and other factors that increase the cost of doing business. While Angola’s institutional environment has improved, it still ranks in the lowest quintile for the overall indicator of doing business.4

5. To account for these dimensions we follow a two-step approach. First, we estimate an equation for the equilibrium rate accounting for productivity differentials, aid, and remittances flows.5 Second, the residual from the estimated equation is used to compute a measure of exchange rate misalignment. This measure can then be correlated with indicators of structural bottlenecks that can affect price levels.

6. The empirical results confirm that several key structural bottlenecks are associated with observed differences in prices across countries. The first stage regression suggests a price level in Angola roughly 20 percent above the predicted value in 2010, based on the three considered determinants. 6 This is broadly in line with the mean value under the three CGER procedures outlined above. Using then the latest observation available for each of the countries in the sample suggests a strong link between a higher price level and: (i) a low level of secondary education, pointing to the impact of limited availability of skilled human capital on competitiveness; and (ii) infrastructure constraints, measured by access to electricity and the usage of mobile phones (as a measure of constraints to telecommunication). In addition, the data support a correlation between the overall Ease of Doing Business measure of the World Bank and competitiveness of the respective economies (Figure 5).

Figure 5.Angola: Exchange Rate Misalignment Factors

Sources: World Bank, World Development Indicators; and IMF staff calculations.

7. In the case of Angola, these factors appear to be the main determinants of inadequate competitiveness. High transportation and other business costs due to the limited infrastructure and other institutional impediments hinder diversification (Table 1). Similarly, bottlenecks in access to electricity and information and technology networks create additional costs. Addressing these factors is, over time, likely to improved competitiveness and to promote diversification. The Angolan government’s plans of refurbishing secondary and tertiary roads and the ongoing implementation of a one-stop-shop system for the registration of businesses are steps in the right direction. More investment in higher education is another crucial element.

Table 1.Angola: Selected Doing Business Indicators, 2008 and 2012
Starting a business
Procedures (number)1284
Starting a business - Time (days)1196851
Cost (percent of income per capita)344119225
Registering property
Procedures (number)770
Time (days)334184150
Cost (percent of property value)1138
Paying taxes
Time (hours per year)272282−10
Total tax rate (percent of profit)53530
Trading across borders
Time to export (days)644816
Cost to export (U.S. dollars per container)1,4501,850−400
Time to import (days)584513
Cost to import (U.S. dollars per container)1,9252,690−765
Enforcing contracts
Time (days)1,0111,0110
Cost (percent of claim)44440
Source: Doing Business Database, World Bank.Improvement No change Weakening
Appendix IV. Reserves Adequacy Assessment

1. During the post-war decade, Angola has been steadily building up international reserves, profiting from the boost to oil revenue from sharply higher oil prices since 2005. In 2002, when the civil war came to an end, Angola’s gross international reserves stood at about US$0.5 billion (0.5 months of next year’s import); by 2008, they had reached nearly US$18 billion (5.1 months of next year’s projected imports). In 2009, the collapse in oil prices led the authorities to spend nearly US$5 billion of reserves in the attempt to defend the exchange rate. Since then, in the context of the SBA recently completed, gross international reserves were re-built to US$27 billion at end-2011 (6.9 months of imports), supported by the recovery of oil prices and by a significant fiscal adjustment effort.

2. A number of simple metrics are widely used to assess the adequacy of a country’s reserve level. The ratio of reserves to prospective imports is useful when considering the adverse effect on the balance of payments inflows of volatile oil revenues. The ratio of reserves to short-term external debt is another useful measure, indicating how long the country can “stay out of the market” in the event of financial turmoil–but in the case of Angola short-term external debt is minimal. The reserves-to-broad-money ratio is considered an indication of the extent of capital flight a country can withstand.

3. Peer comparisons are used widely by market participants but are sensitive to the choice of comparator countries. Compared to other resource-dependent economies with heavily managed exchange rate, Angola’s reserve level appears relatively moderate. Measured in percent of GDP, in months of next year’s imports and relative to total external debt, Angola’s international reserves are below the median value for the comparators (Figure 6).1

Figure 6.Angola: Reserves Adequacy

Sources: IMF World Economic Outlook.

1 Scale adjusted -ALG’s value is above 50.

4. As an additional exercise, the IMF new metric for assessing the exchange rate (ARA) adequacy was used. 2 The results are inconclusive. They suggest that net international reserves in Angola at end-2011 (6.3 months of imports) were above the level considered prudent for precautionary purposes (less than 4 months of imports). Perhaps the methodology is not well suited for resource dependent countries, and tends to underestimate the need for reserves in those countries (Figure 6). Of the peer group of resource-rich-countries with managed exchange rate regimes, only Bolivia and Russia are in the ARA database. They both significantly exceed the ARA metric “optimal” value of reserve holdings. In addition, the “optimal” value for the ARA metric is below the level prevailing at the start of the 2009 crisis, which proved insufficient for Angola to withstand such an event. In 2009, the collapse in oil prices led the authorities to spend nearly US$5 billion defending the exchange rate. The weakness of Angola’s financial system, and high dollarization increase the demand for international reserves. Still limited access to capital markets and the projected current account deterioration over the medium term also argue for building a significant reserves buffer while oil prices remain favorable.

Angola - International Reserves Developments, 2002–2011 (I)

Sources: IMF World Economic Outlook.

Angola - International Reserves Developments, 2002–2011 (II)

Sources: IMF World Economic Outlook.

Appendix V. Foreign Exchange System

1. Since becoming a member of the IMF in 1989, Angola has availed itself of the transitional provisions under Article XIV, Section 2. These permit a member to maintain and adapt to changing circumstances the exchange measures that were in place at its date of membership, without the need for Fund approval.1

2. At present, Angola maintains exchange measures pursuant to the transitional arrangements under Article XIV, and a number of measures subject to Fund jurisdiction under Article VIII. The measures maintained pursuant to Article XIV are: (i) limits on the availability of foreign exchange for invisible transactions, such as travel, medical or educational allowances; and (ii) limits on unrequited transfers to foreign-based individuals and institutions. In addition, Angola maintains two exchange restrictions subject to Fund jurisdiction under Article VIII, Section 2. These are: (i) limits on the remittances of dividends and profits from foreign investments that do not exceed US$1,000,000; and (ii) the discriminatory application of the 0.015 percent stamp tax on foreign exchange operations. Angola also maintains two multiple currency practices arising from: (i) the Dutch foreign exchange auction; and (ii) the discriminatory application of the 0.015 stamp tax on foreign exchange operations that are subject to approval under Article VIII, Section 3.

3. Angola’s recovery from the 2009 crisis provides a favorable environment for a further liberalization of the foreign exchange system. Elimination of the exchange measures and acceptance by Angola of the obligations of Article VIII, Sections 2(a), 3 and 4 would constitute a signal to the international community that Angola maintains an exchange system which is characterized by external current account convertibility, and that it is unlikely to need recourse to exchange measures in the foreseeable future.

All QFOs previously conducted by Sonangol, except the provision of fuel subsidies and the servicing of oil collateralized external credit lines, are to be phased out during 2012. Several government agencies have already begun to assume oversight for these QFOs and discussions are underway to separate the accounts of Sonangol Concessionaire as fiscal agent from its corporate activities.

For example, the use of the non-oil current primary balance as fiscal anchor avoids the difficulties in distinguishing between current and capital spending, which may also end up incentivizing spending to be classified as capital in nature. Similarly, using an overall balance as fiscal anchor would facilitate masking an increase in spending with additional oil revenue.

The newly approved legislation eliminates the reimbursement for profit margins and taxes on the state-owned refinery.

The government maintains a large share of its oil revenues in foreign-exchange deposits at the BNA, which the BNA sells to the market, tightly controlling exchange rate movements.

The liquidity absorption operation needed may be approximated by the excess liquidity (calculated as the sum of excess reserves and funds placed with the BNA’s liquidity absorption facility). This measure stood at 40 (30) percent of required reserves at end-December 2011 (end-March 2012), or 130 (90) percent of the outstanding stock of BNA bills (Kz 215 billion at end-March 2012).

For instance, banks are inspected on site every two years on average.

A key problem regarding bank asset quality data is the limited recognition of nonperforming loans. This is partly due to the practice of regarding all loans that carry government guarantees (mainly in the construction and infrastructure sector) as current irrespective of whether they are serviced or not. The official figures for Financial Soundness Indicator (FSI) are reported in Table 8. For further references, see the accompanying FSSA document.

The results reported here are largely based on updated estimations by Aydin (2010) and rely also on elasticity estimates from Tokarick (2010).

The macroeconomic balance approach (MB) estimates a current account norm consistent with the country’s macroeconomic fundamentals. The purchasing power parity approach (PPP) is based on the assumption that nominal exchange rates are related to national price levels, and changes in the former should be in line with changes in relative price levels. The external sustainability approach (ES) estimates the current account to GDP ratio required to stabilize net foreign assets (NFA) at a certain normative position. The equilibrium real exchange rate approach (ERER) estimates the equilibrium rate by linking the REER to medium term fundamentals.

Real non-oil sector exports declined by an annual average of 1.2 percent in 2003-2006.

Angola ranks in the 172th position in the 2012 Doing Business, down one position compared with the 2011 rank.

The estimation is given by: ln(Price Leveli, t) = b1fi + b2 ln(Rel. Prodi, t) + dXi, t + ei, t where Price Leveli, t is the relative price level to the US, fi are fixed effects, Rel. Prodi, t is the relative productivity—measured by the relative GDP per capita to the US—, Xi, t includes aid and remittances in percent of GDP, and ei, t is the (log) measure of misalignment of the price level for country i in year t. The estimation sample includes 108 developing and emerging market countries for which data from the WDI is available and spans over the years 1980-2011.

Limited data availability for all the indicators for 2011 implies that no estimate can be provided for 2011. However, given inflation and real exchange rate appreciation in Angola in 2011, it is unlikely that implications for 2011 differ.

Several resource dependent countries have no short term external debt. Thus the traditional short term external debt measure is not used here.

See Assessing Reserve Adequacy, International Monetary Fund, February 14, 2011, at And for details of the new ARA metric, see the supplement to this paper at

Even for members that avail themselves of these transitional provisions, new exchange measures are subject to Fund jurisdiction under Article VIII.

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