The oil price shock that started in mid-2014 has substantially reduced fiscal revenue and exports, with growth coming to a halt and inflation accelerating sharply. This has brought to the forefront the need to address more forcefully vulnerabilities and dependence on oil, and to diversify the economy. The authorities have taken steps to mitigate the impact of the external shock: an 18 percent of GDP improvement in the non-oil primary fiscal balance over 2015-16, mainly through spending cuts including the removal of fuel subsidies, has been implemented; and the kwanza has been devalued against the U.S. dollar by over 40 percent since September 2014, with international reserves being used to smooth the depreciation. However, the exchange rate has been re-pegged since April 2016 leading to an appreciation of the kwanza in real terms, and further policy actions are needed to continue adjusting the economy to the ‘new normal' in the oil market and to return growth to a level consistent with poverty reduction.

Abstract

The oil price shock that started in mid-2014 has substantially reduced fiscal revenue and exports, with growth coming to a halt and inflation accelerating sharply. This has brought to the forefront the need to address more forcefully vulnerabilities and dependence on oil, and to diversify the economy. The authorities have taken steps to mitigate the impact of the external shock: an 18 percent of GDP improvement in the non-oil primary fiscal balance over 2015-16, mainly through spending cuts including the removal of fuel subsidies, has been implemented; and the kwanza has been devalued against the U.S. dollar by over 40 percent since September 2014, with international reserves being used to smooth the depreciation. However, the exchange rate has been re-pegged since April 2016 leading to an appreciation of the kwanza in real terms, and further policy actions are needed to continue adjusting the economy to the ‘new normal' in the oil market and to return growth to a level consistent with poverty reduction.

Fund Relations

(As of November 30, 2016)

Membership Status: Joined September 19, 1989; Article XIV

article image

Latest Financial Arrangements:

article image

Projected Payments to Fund

(SDR Million; based on existing use of resources and present holdings of SDRs):

article image

Implementation of HIPC Initiative: Not Applicable

Implementation of Multilateral Debt Relief Initiative (MDRI): Not Applicable

Implementation of Catastrophe Containment and Relief (CCR): Not Applicable

Safeguards Assessments:1 The first-time safeguards assessment, which was finalized in May 2010, found that the National Bank of Angola (BNA) is subject to annual external audits by a reputable firm, but the audit opinions were qualified. The assessment confirmed weak governance and transparency practices at the BNA, including lack of timely publication of annual financial statements. The assessment made recommendations to strengthen the control framework in the reserves management and internal audit areas, and to enhance the legal framework and independence of the central bank. Some progress has been made in addressing recommendations. Outstanding key recommendations include: (i) amending the BNA Law to align it with best international practices; (ii) implementing International Financial Reporting Standards (IFRS); and (iii) resolving remaining audit qualifications. The audited 2015 financial statements have yet to be published, as stipulated under the Safeguards Policy.

Exchange Arrangements: The de jure exchange rate arrangement is floating. The de facto exchange rate arrangement has been classified as ‘other managed’ since June 2015. However, the kwanza has been re-pegged to the U.S. dollar since mid-April 2016. The BNA closely monitors exchange rate fluctuations to maintain price stability in the economy and frequently intervenes in the foreign exchange market by holding foreign exchange auctions and direct sales. The BNA receives foreign currency from taxes paid by oil companies to the government, and also buys foreign exchange from oil companies who make payments to residents for services provided to them in kwanza. The BNA then sells the foreign currency to the market, with special focus on the oil and other priority sectors. The official exchange rate of the kwanza vis-à-vis the U.S. dollar has declined by more than 40 percent since September 2014. International reserves have been used to smooth the depreciation, declining by US$6⅔ billion since September 2014, to US$20⅓ billion in November 2016 on a net basis. The BNA publishes the auction results and respective reference rates.

Angola continues to maintain restrictions on the making of payments and transfers for current international transactions under the transitional arrangements of Article XIV, Section 2. 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 three exchange restrictions subject to Fund jurisdiction under Article VIII, Section 2(a) resulting from (i) the discriminatory application of the 0.015 percent stamp tax on foreign exchange operations; (ii) the operation of the priority list for access to U.S. dollars at the official exchange rate; and (iii) a special tax of 10% on transfers to non-residents under contracts for foreign technical assistance or management services.2 Angola also maintains three multiple currency practices that are subject to approval under Article VIII, Section 3 arising from the lack of a mechanism to prevent potential spreads in excess of 2 percent emerging (i) between successful bids within the BNA’s foreign exchange auction; and (ii) for transactions that take place at the reference rate in place and the rate at which transactions take place in the foreign exchange auction on that day, and (iii) the discriminatory application of the 0.015 stamp tax on foreign exchange operations.

Article IV Consultation: Angola is on the standard 12-month cycle. The next Article IV Consultation is scheduled to be completed by January 2018.

Technical Assistance: Technical assistance activities since 2013 are listed below:

article image

Resident Representative: Mr. Max Alier has been the IMF Resident Representative in Angola since May 2015.

Joint IMF-World Bank Management Action Plan

Implementation Matrix

article image

Statistical Issues

Angola—Statistical Issues Appendix

As of November 30, 2016

article image
article image

Table of Common Indicators Required for Surveillance

article image

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).

1

For a description of the IMF Safeguards Assessment framework, see http://www.imf.org/external/np/exr/facts/safe.htm.

2

See IMF Country Report No. 15/301.