Statement by the IMF Staff Representative

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.

Abstract

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.

March 4, 2005

1. This statement provides additional information that has become available since the circulation of the staff report. The information does not change the thrust of the staff appraisal.

2. The monetary aggregates expanded more strongly than expected in December, 2004. For the 12 months to end-December 2004, currency in circulation grew by 39 percent, reserve money grew by 46 percent and broad money M3 grew by 59 percent. Corresponding estimates in the staff report were 27 percent, 30 percent and 46 percent respectively. The faster monetary growth seems to have been associated primarily with larger-than-expected end-year withdrawals from government deposits, perhaps associated with a concentration of payments for the clearance of domestic arrears.

3. Preliminary data on central government revenue, expenditure and borrowing for 2004 suggest that, while government expenditure on an accruals basis was lower than estimated in the staff report, the cash fiscal deficit for 2004 was similar to staff’s estimate. However, these data are still provisional and incomplete.

4. Consumer prices increased by nearly 2 percent in January 2005, in line with expectations. On a 12-month basis, the inflation rate fell marginally to 30 percent.

5. Retail prices of petroleum products were increased in February and March 2005 by 11 percent and 6 percent, respectively. There have been four increases since May 2004. The price of a gallon of gasoline is now about US$1.75.

6. At end-February 2005, the Kwanza exchange rate was 87 to the U.S. dollar, a depreciation of approximately 9 percent since end-February 2004.

7. A staff mission to Luanda is tentatively scheduled for the end of March to discuss a possible SMP.