IMF Executive Board Completes First Review Under Stand-by Arrangement with Angola and Approves US$171.5 Million Disbursement

This paper discusses key findings of the First Review Under the Stand-By Arrangement for Angola. The paper reveals that the authorities’ reforms are beginning to bear fruit in terms of achieving key program goals. The heavy foreign exchange market pressures that were evident at the program negotiations stage (September 2009) have eased. The reintroduction of the foreign exchange auction system has led to a significant and orderly adjustment in the official rate, and together with a modest appreciation of the parallel rate, has narrowed the spread between the two markets.

Abstract

This paper discusses key findings of the First Review Under the Stand-By Arrangement for Angola. The paper reveals that the authorities’ reforms are beginning to bear fruit in terms of achieving key program goals. The heavy foreign exchange market pressures that were evident at the program negotiations stage (September 2009) have eased. The reintroduction of the foreign exchange auction system has led to a significant and orderly adjustment in the official rate, and together with a modest appreciation of the parallel rate, has narrowed the spread between the two markets.

The Executive Board of the International Monetary Fund (IMF) today approved the first review of Angola’s performance under an economic program supported by the Stand-by Arrangement (SBA). The approval enables the disbursement of SDR 114.52 million (about US$171.5 million), bringing total disbursements under the arrangement to SDR 343.56 million (US$514.5 million)

The Executive Board also granted waivers of non-observance for the continuous performance criterion on the non-accumulation of new external payment arrears and for the end-March 2010 quantitative performance criterion on the non-accumulation of new domestic payments arrears.

The 27-month SBA for SDR 858.9 million (about US$1.3 billion) with Angola was approved on November 23, 2009 (Press Release No. 09/425) to help the country cope with the effects of the global economic crisis.

Following the Executive Board’s discussion on Angola, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, stated:

“The authorities are to be commended for their good start in implementing a comprehensive reform program to address Angola’s macroeconomic imbalances. The reforms are beginning to bear fruit, and the authorities are firmly committed to address the remaining challenges. The renewal of the foreign exchange auctions has facilitated an orderly and significant exchange rate adjustment, and further improvements in the workings of the foreign exchange auction system are planned. The elimination of the remaining administrative controls is a priority, once supportive reforms to improve liquidity management are in place.

“The increase of the program’s external borrowing ceiling can be undertaken in light of Angola’s large infrastructure needs and low debt burden, but it will be essential that the associated projects are soundly appraised and well implemented, and that the debt created is effectively managed. The authorities’ commitments to strengthen public debt management and establish a project appraisal framework to ensure the efficient use of public resources are welcome.

“Fiscal policy will continue to be sufficiently tight to support the authorities’ key goal of strengthening the external position and ensuring fiscal sustainability. The authorities’ intention to lay out a concrete plan in the coming weeks to clear the stock of domestic arrears is welcome.

“The measures being taken by the National Bank of Angola (BNA) to publish their audited financial statements and to strengthen internal controls and the internal audit function are important steps of the BNA’s own modernization strategy. The authorities’ implementation of their reform program merits continued support from the Fund. The existing and proposed policy measures give confidence that program objectives and targets can be realized,” Mr. Portugal added.

Angola: First Review Under the Stand-By Arrangement and Request for a Modification of a Performance Criterion
Author: International Monetary Fund