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Angola: Under the IMF supervision


In a context of real economic change, Angola has restored relations with the IMF in late 2018. Nevertheless, the support program starts within a weakened near-term outlook.


TRANSCRIPT // Angola: Under the IMF supervision : October 2019

Beyond political transition, Angola has been undergoing for the last two years a real economic change, through business-friendly reforms, hydrocarbon sector reshaping and new foreign exchange policy. The government has also restored relations with the Monetary Fund resulting in a three years extended agreement in December 2018.

A mild recovery is expected in the near term, after three years of recession.  But GDP growth should remain weak due to several reasons.

First, the oil sector, which is the main source of economic growth, fiscal income and foreign exchange earnings, has suffered from falling oil production since 2015 due to maturing fields and a lack of new exploration opportunities.

Moreover, the external environment is weak due to higher oil price volatility and trade tensions between the U.S. and China, Angola’s major trading partner. Within this framework, the government continues efforts to sustain the private-sector growth, but the still-ailing access to foreign exchange keeps on straining the overall economic dynamics.

The country uses its fx earnings to import refined oil as well as to service debt payments, which have tripled since 2014t, thus leading to a foreign reserves shortage. Despite the abandon of currency peg in January 2018, access to foreign currency remains difficult. After having lost more than 40% in 2018, the kwanza has registered a further 15% fall since the beginning of the year and it is now traded considerably higher in the black market.

Angola’s government has also started some fiscal reforms, but its room for maneuver remains slim as the debt-to-GDP ratio more than doubled in the last four years. The Government is committed to develop the primary domestic debt market in local currency and enforce prudent SOE borrowing. A privatization program has also been considered. Even if public debt-to-GDP ratio is likely to decline next year, it remains highly vulnerable to currency risk and declining oil prices.

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