Abstract
IMF Country Report No. 23/100
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IMF Country Report No. 23/100
ANGOLA
2022 ARTICLE IV CONSULTATION—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR ANGOLA
March 2023
Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2022 Article IV consultation with Angola, the following documents have been released and are included in this package:
A Press Release summarizing the views of the Executive Board as expressed during its February 22, 2023, consideration of the staff report that concluded the Article IV consultation with Angola.
The Staff Report prepared by a staff team of the IMF for the Executive Board's consideration on February 22, 2023, following discussions that ended on December 16, 2022, with the officials of Angola on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on February 7, 2023.
An Informational Annex prepared by the IMF staff.
A Staff Supplement updating information on recent developments
A Statement by the Executive Director for Angola.
The documents listed below have been or will be separately released.
Selected Issues
The IMF's transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities' policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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© 2023 International Monetary Fund
Press Release
PRESS RELEASE
PR23/52
IMF Executive Board Concludes 2022 Article IV Consultation with Angola
FOR IMMEDIATE RELEASE
Washington, DC – February 23, 2023: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Angola.
Angola's economy continued to recover from the COVID-19 pandemic in 2022, supported by higher oil prices, improved oil production, and resilient non-oil activity. Non-oil growth was broad-based despite a challenging external environment. Growth is estimated at 3.5 percent for 2023. Headline inflation declined significantly to 13.8 percent y/y at end-December 2022, driven by lower global food prices, a stronger kwanza, and previous efforts by the central bank to tighten monetary policy.
The non-oil primary deficit increased in 2022 following higher-than-budgeted capital expenditure and higher-than-expected fuel subsidy costs. Nonetheless, the public debt-to-GDP ratio fell by an estimated 17.5 percentage points of GDP to an estimated 66.1 percent of GDP, aided by a stronger exchange rate. The current account is estimated to have remained in a large surplus in 2022, while foreign currency reserve coverage remained adequate.
Overall growth is expected to continue in 2023 and reach about 4 percent in the medium term, as the authorities' structural reform agenda supports the non-oil sector. Inflation should continue its gradually declining path, reaching single digits in 2024. The 2023 budget envisions a resumption of fiscal adjustment, which is necessary to approach the authorities' twin medium-term fiscal and debt targets and guard against debt vulnerabilities. Downside risks to the near-term outlook include a larger-than-expected decline in global oil prices and renewed global food price pressures, as well as adverse weather conditions that impact the agriculture sector.
Executive Board Assessment2
Executive Directors agreed with the thrust of the staff appraisal. They commended the Angolan authorities' sound policies and commitment to reforms following the conclusion of the Fund supported program and welcomed the economic recovery in 2022. Given continued vulnerabilities and elevated global uncertainty, Directors encouraged the authorities to maintain the reform momentum and diversify the economy to safeguard the hard-won macroeconomic stability and to ensure an inclusive and sustainable growth.
Directors welcomed the authorities' commitment to their medium term fiscal and debt targets and called for ambitious, growth friendly adjustments to achieve those targets. In that context, they recommended further mobilization of non-oil revenue, strengthening revenue administration and public financial management, and reforming state owned enterprises. Such efforts, together with spending rationalization, would create the necessary fiscal space for public investment and targeted social spending. Directors also welcomed the authorities' commitment to fuel subsidy reforms when conditions allow, and encouraged faster implementation of the cash transfer program. Continued sound debt management is also crucial.
Directors commended the Banco Nacional de Angola's (BNA) decisive actions that resulted in a large disinflation in 2022. Noting that inflation remains elevated and risks to price stability persist, Directors recommended a wait and see approach to monetary policy actions to support the disinflationary path. Directors also supported the BNA's efforts to strengthen its policy effectiveness, including by aligning the interbank rate with the policy rate and transitioning toward an inflation targeting framework. They also welcomed the authorities' commitment to exchange rate flexibility and their plan to eliminate the remaining exchange restrictions.
Directors encouraged the authorities to continue their efforts to strengthen financial stability, building on strong previous progress. They noted, in particular, the need to implement the remaining secondary legislation needed to fully implement the Financial Institutions Law, including for bank recovery and resolution planning. Directors also emphasized the importance of adopting a more comprehensive approach to dealing with problem banks. Efforts to address nonperforming loans should continue. Directors highlighted the need to continue the strong reform momentum, since structural reforms would be essential to diversify Angola's economy and achieve inclusive and sustainable growth. They emphasized the need to bolster human and physical capital and access to private credit. Directors also noted the need to make further progress on strengthening governance, transparency, and the AML/CFT regime, to improve the business environment and promote private investment. In this context, they encouraged publication of the audited COVID expenditure reports. Completing the anti-corruption strategy is also important. Directors also commended the authorities' focus on building climate resilience and on fostering gender equality.
It is expected that the next Article IV consultation with Angola will be held on the standard 12-month cycle.
Angola: Selected Economic Indicators
Includes debt of the Central Government, external debt of state oil company Sonangol and state airline company TAAG, and guaranteed debt.
Angola: Selected Economic Indicators
| 2021 | 2022 | 2023 | |
| Prel. | Proj. | Proj. | |
| Real economy (percent change, except where otherwise indicated) | |||
| Real gross domestic product | 1.1 | 2.8 | 3.5 |
| Oil sector | -11.5 | 2.0 | 1.2 |
| Non-oil sector | 5.3 | 3.2 | 4.3 |
| Nominal gross domestic product (GDP) | 42.9 | 19.1 | 11.4 |
| Oil sector | 74.1 | 5.1 | -2.5 |
| Non-oil sector | 32.5 | 25.2 | 16.5 |
| GDP deflator | 41.4 | 15.8 | 7.6 |
| Non-oil GDP deflator | 25.8 | 21.4 | 11.7 |
| Consumer prices (annual average) | 25.8 | 21.4 | 11.7 |
| Consumer prices (end of period) | 27.0 | 13.8 | 12.3 |
| Gross domestic product (billions of kwanzas) | 47,226 | 56,231 | 62,625 |
| Oil gross domestic product (billions of kwanzas) | 14,483 | 15,222 | 14,845 |
| Non-oil gross domestic product (billions of kwanzas) | 32,743 | 41,009 | 47,780 |
| Gross domestic product (billions of U.S. dollars) | 74.8 | 121.6 | 118.6 |
| Gross domestic product per capita (U.S. dollars) | 2,168 | 3,405 | 3,225 |
| Central government (percent of GDP) | |||
| Total revenue | 23.3 | 23.5 | 21.2 |
| Of which: Oil-related | 14.0 | 14.1 | 11.4 |
| Of which: Non-oil tax | 7.9 | 7.6 | 7.5 |
| Total expenditure | 19.5 | 21.8 | 21.6 |
| Current expenditure | 14.2 | 16.1 | 16.6 |
| Capital spending | 5.3 | 5.6 | 4.9 |
| Overall fiscal balance | 3.8 | 1.7 | -0.4 |
| Non-oil primary fiscal balance | -4.7 | -7.6 | -7.2 |
| Non-oil primary fiscal balance (percent of non-oil GDP) | -6.8 | -10.4 | -9.5 |
| Money and credit (end of period, percent change) | |||
| Broad money (M2) | -9.3 | -4.6 | 10.3 |
| Percent of GDP | 24.4 | 19.5 | 19.3 |
| Velocity (GDP/M2) | 4.1 | 5.1 | 5.2 |
| Velocity (non-oil GDP/M2) | 2.8 | 3.7 | 3.9 |
| Credit to the private sector (annual percent change) | 5.6 | 4.9 | 10.2 |
| Balance of payments | |||
| Trade balance (percent of GDP) | 29.1 | 26.4 | 21.7 |
| Exports of goods, f.o.b. (percent of GDP) | 44.9 | 39.9 | 35.9 |
| Of which: Oil and gas exports (percent of GDP) | 42.6 | 38.0 | 33.8 |
| Imports of goods, f.o.b. (percent of GDP) | 15.8 | 13.5 | 14.2 |
| Terms of trade (percent change) | 52.4 | 29.3 | -13.8 |
| Current account balance (percent of GDP) | 11.2 | 11.0 | 6.3 |
| Gross international reserves (end of period, millions of U.S. dollars) | 14,375 | 14,479 | 14,769 |
| Gross international reserves (months of next year's imports) | 6.6 | 6.5 | 6.4 |
| Exchange rate | |||
| Official exchange rate (average, kwanzas per U.S. dollar) | 631 | 462 | … |
| Official exchange rate (end of period, kwanzas per U.S. dollar) | 555 | 504 | … |
| Public debt (percent of GDP) | |||
| Public sector debt (gross)1 | 83.6 | 66.1 | 64.1 |
| Of which: Central Government debt | 77.6 | 60.8 | 59.5 |
| Oil | |||
| Oil and gas production (millions of barrels per day) | 1.252 | 1.263 | 1.295 |
| Oil and gas exports (billions of U.S. dollars) | 31.8 | 46.2 | 40.1 |
| Angola oil price (average, U.S. dollars per barrel) | 70.7 | 97.8 | 81.6 |
| Brent oil price (average, U.S. dollars per barrel) | 70.8 | 99.6 | 83.3 |
Includes debt of the Central Government, external debt of state oil company Sonangol and state airline company TAAG, and guaranteed debt.
Angola: Selected Economic Indicators
| 2021 | 2022 | 2023 | |
| Prel. | Proj. | Proj. | |
| Real economy (percent change, except where otherwise indicated) | |||
| Real gross domestic product | 1.1 | 2.8 | 3.5 |
| Oil sector | -11.5 | 2.0 | 1.2 |
| Non-oil sector | 5.3 | 3.2 | 4.3 |
| Nominal gross domestic product (GDP) | 42.9 | 19.1 | 11.4 |
| Oil sector | 74.1 | 5.1 | -2.5 |
| Non-oil sector | 32.5 | 25.2 | 16.5 |
| GDP deflator | 41.4 | 15.8 | 7.6 |
| Non-oil GDP deflator | 25.8 | 21.4 | 11.7 |
| Consumer prices (annual average) | 25.8 | 21.4 | 11.7 |
| Consumer prices (end of period) | 27.0 | 13.8 | 12.3 |
| Gross domestic product (billions of kwanzas) | 47,226 | 56,231 | 62,625 |
| Oil gross domestic product (billions of kwanzas) | 14,483 | 15,222 | 14,845 |
| Non-oil gross domestic product (billions of kwanzas) | 32,743 | 41,009 | 47,780 |
| Gross domestic product (billions of U.S. dollars) | 74.8 | 121.6 | 118.6 |
| Gross domestic product per capita (U.S. dollars) | 2,168 | 3,405 | 3,225 |
| Central government (percent of GDP) | |||
| Total revenue | 23.3 | 23.5 | 21.2 |
| Of which: Oil-related | 14.0 | 14.1 | 11.4 |
| Of which: Non-oil tax | 7.9 | 7.6 | 7.5 |
| Total expenditure | 19.5 | 21.8 | 21.6 |
| Current expenditure | 14.2 | 16.1 | 16.6 |
| Capital spending | 5.3 | 5.6 | 4.9 |
| Overall fiscal balance | 3.8 | 1.7 | -0.4 |
| Non-oil primary fiscal balance | -4.7 | -7.6 | -7.2 |
| Non-oil primary fiscal balance (percent of non-oil GDP) | -6.8 | -10.4 | -9.5 |
| Money and credit (end of period, percent change) | |||
| Broad money (M2) | -9.3 | -4.6 | 10.3 |
| Percent of GDP | 24.4 | 19.5 | 19.3 |
| Velocity (GDP/M2) | 4.1 | 5.1 | 5.2 |
| Velocity (non-oil GDP/M2) | 2.8 | 3.7 | 3.9 |
| Credit to the private sector (annual percent change) | 5.6 | 4.9 | 10.2 |
| Balance of payments | |||
| Trade balance (percent of GDP) | 29.1 | 26.4 | 21.7 |
| Exports of goods, f.o.b. (percent of GDP) | 44.9 | 39.9 | 35.9 |
| Of which: Oil and gas exports (percent of GDP) | 42.6 | 38.0 | 33.8 |
| Imports of goods, f.o.b. (percent of GDP) | 15.8 | 13.5 | 14.2 |
| Terms of trade (percent change) | 52.4 | 29.3 | -13.8 |
| Current account balance (percent of GDP) | 11.2 | 11.0 | 6.3 |
| Gross international reserves (end of period, millions of U.S. dollars) | 14,375 | 14,479 | 14,769 |
| Gross international reserves (months of next year's imports) | 6.6 | 6.5 | 6.4 |
| Exchange rate | |||
| Official exchange rate (average, kwanzas per U.S. dollar) | 631 | 462 | … |
| Official exchange rate (end of period, kwanzas per U.S. dollar) | 555 | 504 | … |
| Public debt (percent of GDP) | |||
| Public sector debt (gross)1 | 83.6 | 66.1 | 64.1 |
| Of which: Central Government debt | 77.6 | 60.8 | 59.5 |
| Oil | |||
| Oil and gas production (millions of barrels per day) | 1.252 | 1.263 | 1.295 |
| Oil and gas exports (billions of U.S. dollars) | 31.8 | 46.2 | 40.1 |
| Angola oil price (average, U.S. dollars per barrel) | 70.7 | 97.8 | 81.6 |
| Brent oil price (average, U.S. dollars per barrel) | 70.8 | 99.6 | 83.3 |
Includes debt of the Central Government, external debt of state oil company Sonangol and state airline company TAAG, and guaranteed debt.
Title Page
ANGOLA
STAFF REPORT FOR THE 2022 ARTICLE IV CONSULTATION
February 7, 2023
EXECUTIVE SUMMARY
Context. Angola achieved macroeconomic stabilization amid a very difficult environment in 2020 and growth began to recover in 2021. The recovery picked up pace in 2022, aided by high oil prices. President João Lourenço was reelected in August 2022. Angola continues to face significant challenges, including debt vulnerabilities and the need to diversify the economy as oil production declines over the long term. The authorities' reform agenda, including their upcoming 2023–27 National Development Plan, is focused on these challenges.
Policy Issues
Fiscal Policy. Following significant fiscal loosening in 2022, the authorities need to take policy action to boost non-oil tax revenues and phase out fuel subsidies, while increasing support for the vulnerable. These measures should help reduce debt vulnerabilities, create fiscal space, and achieve their medium-term fiscal and debt anchors. They should also accelerate the pace of progress of structural fiscal reforms to maximize non-oil revenues and enhance the impact of spending.
Monetary and Exchange Rate Policy. Monetary policy should maintain a wait-and-see approach while inflation remains high (albeit steadily declining) given potential risks to prices. The central bank should continue its transition toward an inflation-targeting framework and its flexible exchange rate regime, which has served Angola well as a shock absorber.
Banking Sector Policies. Continued efforts are needed to strengthen financial stability, including the implementation of the new financial institution law and a comprehensive approach to dealing with troubled banks.
Structural and Diversification Policies and Strategy. Successful diversification and achievement of development goals will hinge on improvements in human and physical capital, underpinned by more effective social and public investment spending. Improved access to credit is also critical. Efforts are required to further reduce corruption and boost government transparency.
Approved By
Vitaliy Kramarenko and Andrea Schaechter
Discussions took place in Luanda during November 29-December 16, 2022. The mission held discussions with Minister of Finance Vera Esperança dos Santos Daves de Sousa, Minister of Economy and Planning Mario Augusto Caetano João, Banco Nacional de Angola Governor José de Lima Massano, and other senior officials, as well as representatives of the private sector and development partners. The staff team comprised Mr. Sy (head), Ms. Abdelrazek and Mr. Weiss (both AFR), Mr. Benicio (FAD), Ms. Karlsdóttir (MCM), Ms. Sin (SPR), and Messrs. Souto (resident representative) and Miguel (local economist). Mr. Essuvi (OEDAE) participated in key policy meetings. Ms. Avila-Yiptong provided research support. Ms. Joseph assisted with the preparation of this report.
Contents
CONTEXT
RECENT ECONOMIC DEVELOPMENTS
OUTLOOK AND RISKS
POLICY DISCUSSIONS: CONSOLIDATING STABILITY AND SETTING THE STAGE FOR INCLUSIVE GROWTH
A. Firming Up Medium-Term Debt Sustainability
B. Proceeding with Disinflation and Strengthening the External Position
C. Maintaining Banking Sector Stability
D. Diversifying the Economy and Shoring Up Resilience
STAFF APPRAISAL
FIGURES
1. Selected High-Frequency Indicators, 2017–22
2. Fiscal Developments, 2017–22
3. Selected High-Frequency Monetary Indicators, 2017–22
4. External Sector Developments, 2017-22
TABLES
1. Main Economic Indicators, 2019–26
2a. Statement of Central Government Operations, 2019–24
2b. Statement of Central Government Operations, 2019–24 (Percent of GDP, unless otherwise indicated
2c. Statement of Central Government Operations, 2019–24 (Percent of non-oil GDP, unless otherwise indicated)
2d. Statement of Central Government Operations, 2019–24 (Billions of kwanzas, unless otherwise indicated)
3. Monetary Accounts, 2019–24
4a. Balance of Payments, 2019–24
4b. Balance of Payments, 2019–24 (Millions of U.S. dollars, unless otherwise indicated)
5. External and Public Debt, 2019–25
6. Financial Stability Indicators, 2015–22
7. Fiscal Financing Needs and Sources, 2022–25
8. Indicators of IMF Credit, 2021–30
ANNEXES
I. Climate Change in Angola
II. Status of Key Recommendations of the 2021 Article IV Consultation
III. Risk Assessment Matrix
IV. Debt Sustainability Analysis
V. External Sector Assessment
VI. Capacity Building in Angola
Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.
