Eco Conjoncture

Taking steps forward

02/27/2019

The first year in office of the new president Joao Lourenço’s reveals a rather positive shift in economic policies, given his determination to clean up politics and the scope of the economic reforms engaged so far. The abandon of the currency peg has eased some pressures on the fx market though they still remain important. The financing package recently signed with the IMF will help to implement structural reforms aimed at diversifying the economy by fostering the development of the private sector. Nevertheless, the overall near-term economic outlook remains embedded in international oil price developments due to the lack of economic diversification. Additionally, the still ailing banking system keeps on straining the private sector. Therefore, the recovery is bound to be very gradual at best due to the persistence of major macroeconomic imbalances.

Despite the new government’s positive shift in economic policy and the upturn in oil prices, the country still faces several challenges. The oil sector is deteriorated, foreign currency liquidity is exposed to high tensions, the household purchasing power is being eroded and the banking system is facing severe difficulties. This is evidenced by the sovereign spread on foreign-currency debt, which continues to be higher than global emerging market one, thus keeping the borrowing on the international capital markets relatively expensive. The IMF financial support, after almost two years of cooperation, is a very welcome measure which could reassure economic agents. The Angola government’s economic policy has clearly changed but the recovery will take time.

Economic reforms are ongoing

Since taking office in September 2017, President Lourenço has made significant reforms to improve financial sector transparency, enhance efficiency in SOEs, lib­eralize the foreign exchange rate regime, and pursue a more business-friendly trajectory in order to improve international investors’ perception of the country’s business climate. In its first year in office, the new government’s agenda that focused on anti-corruption and free market economic reforms have sent positive signals of political change.

In April 2018 the ruling party, the People's Movement for the Liberation of Angola (MPLA), called for an extraordinary congress in September 2018 that marked a political transition of the party’s leadership (the last vestige of Dos Santos hegemony) to the new president who thereby gained uncontested authority with Angola’s political elite and businessmen.

After changing several key political and economic positions to remove the Dos Santos legacy, the government undertook several reforms to attract new investments and faster potential growth.

Most of them have been made to support private sector development. After the simplification of administrative red tape to attract FDI (issuance of visas and residency permits), progress has also been made in getting electricity, promoting competition and combating monopolies. A new law was approved on non-resident investment with the elimination of the minimum commitment of USD 230,000 and the obligation to associate with a local partner holding an equity stake of at least 35%. In order to govern interactions between government and investors, the Agency for Private Investment and Exports (AIPEX) has been created. Moreover, about 74 state-owned companies[1] are on the privatization list.

The government also seems to be driving some moderate improvement in transparency and the reduction of corruption[2]. An anti-corruption unit was created in March 2018 and several high-profile officials from the previous administration were dismissed and prosecuted. If the prosecution for fraud and final arrest of the former president’s son suggest that the Dos Santos family’s influence has waned significantly in the past year, the arrest of a few high profile individuals will not be sufficient to resolve the endemic levels of corruption within key Angolan institutions.

However, according to the World Bank 2019 Doing Business ranking, Angola has progressed by only two notches (to 173 from 175 out of 190 countries), mainly due to some improvement in obtaining electricity, registering property and trading across borders. Likewise, small positive achievements are registered in the Governance Index related to voice and accountability, government effectiveness, political stability and control of corruption. Despite this, the Angola’s business environment remains burdensome.

The new foreign exchange policy has improved fx liquidity. After abandoning the dollar peg in January 2018, the central bank has gradually depreciated the kwanza (AOA) in a controlled manner through a series of auctions. Starting from October 2018, the volume of foreign currency has increased and the central bank stopped direct sales of foreign currency, which will be handled by authorized retail banks. At the same time, the approval of legislation to facilitate the repatriation of funds held abroad aims to reduce the shortage of hard currency.

Lastly, the hydrocarbon sector has also been the subject of deep reform with the passing of a new legislation to define clear and transparent rules for the development of gas reserves as well as some tax cuts for marginal oil fields (those with smaller reserves or with specific technical challenges). In addition, President Lourenço created the new National Oil & Gas Agency. This agency will take over the attribution of oil concessions and the management of production sharing agreements that were previously managed by Sonangol.

A renewed relationship with the IMF

Relationships between Angola and the IMF have been historically tense owing to the fund's criticism of Angola's opaque resource management. Only in 2009, during the last oil price crash, Angola took on a USD 1.4 bn stand-by arrangement (SBA) for the first time to help it manage liquidity challenges.

Angola authorities seriously started again in 2018 to cooperate with the IMF, which considers the current political transition to be an extraordinary break in Angola’s recent history, following the ambitious reforms launched to address macroeconomic and structural imbalances.

More precisely, they are implementing: (i) a Macroeconomic Stabilization Program (MPS) and (ii) the National Development Plan for 2018–22 to address structural bottlenecks, promote human development, public sector reform, economic diversification, and inclusive growth.

The key objectives of the MPS are: i) strengthening of fiscal and debt sustainability, (ii) modernizing the monetary policy framework and exchange rate policy, iii) reducing financial sector vulnerabilities and iv) fostering private-sector-led growth and economic diversification by improving governance and the business environment.

To support the implementation of these reforms, the Angolan government asked for an IMF support program, which was officially signed on the 10th of December 2018. The USD 3.7 billion three-year extended arrangement under the Extended Fund Facility allows an immediate disbursement of USD 990.7 million, while the remaining amount will be disbursed over the remainder of the facility period, subject to semi-annual reviews.

Moving forward, the IMF facility will ease fx liquidity pressures in the near term and send a strong signal on policy stability that is likely to reassure economic agents.

Angola: Overview of the Reform Agenda, 2017-2022

A standstill economy

The sharp decline in oil price from the record high in 2011-2013 has derailed Angola’s economic performance from the 4.5% average level recorded between 2011 and 2015. The real GDP growth strongly slowed down at 0.9% in 2015 and finally entered into recession in 2016 (-2.6%).

Despite the progress that has been made since the arrival of Joao Lourenço’s new government and the upturn in crude oil prices during the first three quarters of 2018 the Angolan economy is expected to report its third consecutive year of recession. It is confirmed by the overall economic sentiment, measured by the “Indicador de Clima Economico” (ICE), which remains in negative territory. According to the recently released data form the National Statistics Institute, the economy contracted by 2.7% year-on-year in Q1/Q3 2018, posting the third consecutive quarter in recession. This contraction is still attributed to the decline in extracting and refining activities, which account for 33% of GDP, as well as trade and construction (close to 20% of GDP).

The oil sector (accounting for 35% of GDP in 2018) continues to face the consequences of both the freeze on most oil exploration projects (considered too expensive) and the massive layoffs to reduce operating costs. Oil production has declined continuously, from 1.8 m barrels per day (b/d) in 2015 to 1.49 m b/d in December 2018, mainly due lack of investments in offshore fields, which are quite costly to maintain, while others have reached maturity production peak and production has started to decline. The period of near-paralysis was also due to deteriorating relationship between Sonangol and the majors’ oil companies.

Recession lasts for the third consecutive year
Still depressed oil & non-oil sectors

In 2019 the total production is supposed to improve with the start-up of the new Kaombo oil field from Total[3]. But the Kaombo ramping up production could take time and its contribution would be visible in oil data by the end of this year. Additionally, the overall oil production will be lowered by 47,000 barrels per day cut in the first term of 2019 in accordance with last year’s OPEC agreement. Both effects would lead to an average estimated oil production almost flat for 2019.

As per the non-oil sector (65% of GDP), it is affected by import restrictions (on non-priority products), persistently high inflation and the expiration of certain subsidies that had lifted households’ purchasing power. Companies continue to battle with commodity shortages, insufficient equipment and financial problems arising from heavy fiscal pressures. The banking system’s deteriorated financial situation will continue to strain private sector development.

Like in many sub-Saharan economies, private consumption in Angola remains the most significant contributor to overall GDP, accounting for around 53% of GDP in 2018, while government consumption and gross fixed capital formation have been less supportive and much more volatile. But lower public spending, high inflation levels and the weak banking system are progressively having an impact on domestic purchasing power, keeping domestic demand subdued.

Looking ahead, financial and policy support from the IMF should bring the Angolan economy out of recession in 2019. More precisely we expect real GDP growth to come to positive territory because of: i) oil GDP expansion coming from stabilisation of oil production and ii) resilient nonhydrocarbon sector.

Nevertheless, the outlook remains highly uncertain. Despite political willingness to continue implementing structural reforms, still-burgeoning corruption, the depreciation of the currency and ballooning government debt are key downside risks to the outlook. Although recent moves to bolster the business environment are encouraging, more comprehensive efforts are imperative to tackle high levels of bureaucracy, low human capital, poor regulation, high levels of corruption and the crowding out of private investment by the public sector.

Fiscal improvements in 2018

Impressive progress was made on reducing the size of the fiscal deficit in 2018. The kwanza's depreciation increased the value of US dollar-denominated oil earnings (which accounted for around half of fiscal revenue last year), and coupled with the rebound in oil prices, allowed a significant fiscal consolidation, decreasing the fiscal deficit from -6.3% of GDP in 2017 to only 0.5% in 2018. The government used most of its higher than anticipated revenues in kwanza to repay some of its domestic debt, mostly Treasury bills (whose stock fell by 50% between January and December) and clear domestic payments arrears in 2018.

According to the draft 2019 Budget document, the government forecasts an ambitious plan to generate a surplus of 1.4% of GDP in 2019 based on an oil price of USD 68 per barrel. This optimistic forecast seems unlikely to happen in 2019 due to the average oil price forecast being much lower than 2018’s level (USD 62 per barrel on average against USD 72 in 2018), while the local currency’s depreciation will be much less marked.But following a weaker international oil price outlook for 2019, the government decided to readjust spending obligations mainly in the provincial budgets.

The introduction of VAT in July 2019 will provide some support to non-oil fiscal revenue, but uncertainty persists about the rate, how it will be introduced[4] and the risk of further delays. Moreover, government efforts to improve the overall efficiency of expenditure will prove tricky, particularly moves to contain public-sector wages, or scale back utility prices. As a result, we expect public finances to remain in deficit in 2019 and slightly deteriorate (-1.5% of GDP).

A still heavy debt burden

The kwanza's major depreciation in the transition to a more flexible exchange rate regime contributed to an increase in the government's interest payments, from 3.3% of GDP in 2017 to 4.2% in 2018 (respectively equivalent to 19.2% and 23.2% expressed as proportion of revenue).

Additionally, about 80% of total public debt is foreign-currency denominated. Therefore, public debt is projected to reach more than 73 percent of GDP in 2018, up from 67% in 2017, largely due to the strong kwanza depreciation occurred in 2018.

The heavy debt burden also adds to the government's financing challenges and total external debt servicing currently consuming 21% of export earnings (up from 10.5% at end-2014). Therefore, negative shocks to the revenue base (like a sharp fall in oil prices) could significantly undermine the government’s ability to service its uncollateralized debt[5] and repay the IMF.

Fiscal boost in 2018 but increasing interest costs (% of GDP)

The large gross financing needs in 2018 are estimated by the IMF to have amounted to 17.3 percent of GDP. The amount is sizeable and challenged by large domestic debt amortization needs with low domestic rollover rates (about 50 percent according to the IMF). Therefore, Angola remains highly dependent on external funding. Bilateral loans from China[6] have so far been the government’s favoured sources. In 2018, the Treasury depleted its cash buffers and issued USD 3.5 billion in Eurobonds in mid-year, and partially rolling over a USD 1.5 billion dollar-denominated domestic bond in August. Therefore, to close the remaining fiscal financing gap, the authorities requested budget support from the IMF.

As per Angola’s sovereign wealth fund, it is making efforts to regain control of its assets. Through international legal actions, it continues to recoup more of its mismanaged assets. The new management is searching for a new international fund manager and external auditor for the assets it has brought back under its control. The authorities are preparing legislation to strengthen the fund’s governance and transparency and set clearer deposit and withdrawal rules. The authorities committed to capitalizing the fund again only when the budget generates surpluses and government debt is below 60 percent of GDP.

Fiscal Financing Needs and Sources, 2018-2021

Measures to contain SOE-related fiscal risks

The liabilities of nearly 80 of Angola’s non-financial SOEs are sizable and increased in 2017. Their capacity to generate income, hence dividends for the Treasury, appears limited. Energy-related Sonangol is the largest of them, and it recently reduced its financial debt after receiving a USD 10 billion capital injection (roughly 10% of GDP).

The government has committed to improve SOEs’ economic efficiency by launching an ambitious SOE restructuring program to start in 2019 over a two-year period. The program would include closing insolvent SOEs and privatizing or restructuring those that are economically viable. Moreover, the creation of a new oversight institute under the Ministry of Finance is expected to strengthen SOE governance and monitoring.

SOEs' Non-financial Performances

Control inflation versus growth bolstering

The Banco Nacional de Angola (BNA) official priority remains achieving price stability (with an inflation target range of 7-9%) but also supplying the foreign exchange market. Given the economy’s structural rigidities, low monetary transmission and heavy reliance on imports, the central bank intends to perform a controlled depreciation to prevent the escalation of inflationary pressures.

After having peaked at 42% in December 2016 as a consequence of the oil shock, inflation has been slowing despite the marked depreciation of the official exchange rate. This was possible thanks to both some coercive measures[7] and the monetary policy tightening through the reserve requirement ratio and the policy rate.

Thanks to a narrowing gap between the kwanza’s dual exchange rates[8], inflation continued to trend downward in most of 2018, reaching 18.2% y-o-y in December 2018 compared with 26% in December 2017 and 40% in December 2016. This disinflationary trend allowed the Central Bank to begin a cycle of gradual monetary easing in July 2018 by cutting its policy interest rate by 150 basis points to 16.50% for the first time in more than two years. The Central Bank lowered again the key policy rate by 75 basis points to 15.75% at its latest meeting on January 25, 2019.

Reaching inflation target will take time

Considering the VAT introduction and the partial recovery in commodities prices, CPI inflation will remain elevated in the medium term and the inflation target range of 7-9% will be hard to be reached, unless the currency re-appreciates.

Current account improved due to oil price relief

The current account balance is expected to post a surplus in 2018 (1.9% of GDP). In 2018, the trade surplus generated by the recovery in oil prices was enough to offset the deficits in the balances of services and revenue. But based on our oil forecast in 2019 (average of USD 62 per barrel against USD 72 average in 2017) the CAD is expected to deteriorate to -1.9% of GDP.

Traditionally one of the largest recipients of foreign direct investment inflows in Africa, Angola experienced years of net divestments (from 2010 to 2014), largely reflecting the impact of the 2008-09 financial crisis with foreign oil firms divesting from Angola. In 2017 most of the oil companies repatriated some of their investments abroad, which led to a negative net outflow in FDI. Moreover, foreign FDI inflows remain constrained by the persistent risk of restrictions on repatriation of foreign investors’ fx revenues. Resident FDI outflows have fallen so far due to the impact of falling oil prices on Sonangol’s investment capacity.

This trend combined with rising external public-sector liabilities and contracting fx reserves has shifted the net international investment position (NIIP) into negative territory so far.

Angola’s external debt only includes the external debts of the central government, state-owned oil company Sonangol, state-owned airline TAAG, and public guarantees denominated in foreign currency, as we have no information on private sector external debt. It increased to 45% of GDP in 2018 due to GDP contraction and is projected to remain elevated in the medium term (around 50%). Angola’s external debt remains vulnerable to unfavorable current account developments and large exchange rate depreciations (according to the IMF’s assessment, external debt would rise to about 70 percent of GDP in response to the 30 percent depreciation in the real effective exchange rate).

Despite improvements, pressures on reserves persist

Easing FX shortages

In the last quarter 2018 the kwanza has begun to stabilize, after its sharp correction. Indeed, after the abandonment of the peg to the US dollar in January, the kwanza depreciated 46% yoy between end of 2017 and end 2018. The "peg" is not being completely replaced by a free float, as upper and lower "bands" for transactions keep the fluctuation of the kwanza within ±2% points of the rate determined at the previous auction.

Nevertheless, the gradual floating of the kwanza has entailed an easing of dollar shortage and capital controls. Since 3Q 2018 the central bank has been addressing the backlog of FX demand from 2014–17 via increased sales of FX and more frequent auctions (from one to three auctions a week). It also eliminated the priority list, allowing private exporters and international oil companies to supply foreign currency (provided proper documentation is supplied) to importers in order to increase the availability of foreign currency. Starting from end-September 2018, the central bank holds weekly auctions with commercial banks which determine the kwanza's value.

Despite improvements, pressures on reserves persist

Despite the upturn in crude oil prices, the central bank’s foreign reserves have continued to decrease (expected to be USD 15.4 bn in Q4 2018 from USD 17.4 bn in Q4 2017). Consequently, the bulk of foreign exchange controls[9] is likely to be maintained in the medium term.

Notwithstanding efforts by the government to repatriate funds held in overseas accounts, the currency will continue to come under pressure. The spread between the official and parallel exchange rates is still wide (it narrowed from 150 percent in December 2017 to roughly 20 percent in November 2018). Moreover, the depreciation in the parallel rate market started at end September 2018 indicates that net demand for USD is still large. Therefore pressures remain in 2019 and a further 20% devaluation of kwanza is very likely.

A still ailing banking sector

With total assets of 13.6 trillion Angolan kwanzas (USD 43.8 billion) as of November 2018, the Angolan banking system is the third-largest in Sub-Saharan Africa. Thirty commercial banks were authorized to operate in Angola as of December 2017. They offer basic banking services including deposits, corporate and retail lending and foreign exchange services. The six largest banks[10] controlled around 75% of the sector’s assets as of December 2017, thus leaving a long tail of much smaller banks. As regards ownership, it is mostly spread out among a mixture of SOEs, Portuguese parent institutions and Chinese investors.

Financial soundness indicators

Domestic credit's growth back to positive

The sector's growth has slowed over the past four years due to the economic downturn coming from oil’s lower prices and declining output. In this context, the central bank’s prioritization of price stability and exchange rate management has hindered bank operations so far. As a consequence, the overall banking system remains relatively small, with domestic credit accounting for just 30% of GDP, as of November 2018. In this context, the reappointment[11] of Mr José Massano, as central bank governor was intended to restore credibility in the financial sector.

Moderate credit growth and improved soundness indicators

According to the Banco Nacional de Angola, the nominal credit growth averaged 15% y-o-y in September 2018 against an average of -5% in the same period in 2017. But considering that more than 30% of total loans are FC denominated, a significant portion of this overall credit growth has been underpinned by the kwanza’s depreciation which has inflated the nominal growth of foreign denominated loans. Without kwanza depreciation, the fc denominated credit growth would be at around 2% yoy at end September 2018.

Weak economic activity in the past three years has eroded the banking sector’s soundness. Overall, the capital ratio remains healthy (at 21.5% at November 2018), loan-to-deposit ratio is low (at 53.3%) and most banks are profitable (with an average 3.0% return on assets,). All banks have migrated to the IFRS accounting system that, inter alia, has more robust provisioning requirements.

In the aftermath of the oil price collapse the level of NPLs rose dramatically, reaching 29% of total loans in December 2017 compared with an average of 10.6% between 2013 and 2016. Nonperforming loan levels varied considerably from bank to bank, with state-owned institutions hit particularly hard by the oil price crash of 2015/16[12] , while other banks contained the deterioration of their balance sheets through provisioning and limited lending. Thanks to the gradual recovery in global oil prices and Recredit’s[13] repurchases of bad loans, asset quality has started to improve in 2018, with NPLs reaching 26.7% in November 2018. However, overall asset quality remains poor and further improvements will be slow because of the still challenging operating environment given the recent decline in oil prices and the overall cut back in oil production. Poor asset quality is putting pressure on both liquidity and capitalization.

As per liquidity, the banking system is characterized by a high level of local currency liquidity since lending to small and medium-sized enterprise (SME) remains limited because of banks' weak appetite for risk and poor credit management capabilities. On the contrary, the tight funding although the liberalization of foreign exchange has stemmed some pressures on foreign currency liquidity, and forex liquidity conditions will remain challenging in 2019.

With regard to capitalization, in February 2018 the central bank has tripled the commercial banks’ minimum capital requirement (from AOA 2.5 bn to AOA 7.5 bn by end-2018). As a consequence, the ratio of capital to risk-weighted assets increased to 21.5% in November 2018 from 17.8% in November 2017. As many as one-third of 29 banks currently operating in Angola are expected to struggle to meet this new limit[14], a new wave of banking consolidation is very likely in the medium term.

Downside risks remain significant

Nevertheless, downside risks remain very high and weigh on the Angolan banking sector’s credit soundness. Firstly, in case of disappointing oil production, real GDP growth will contract bringing down credit growth. Additionally, any faster currency depreciation or higher food prices will see inflation accelerate and prompt the BNA to tighten its policy stance. Though Angola’s monetary policy transmission mechanism between the benchmark interest rate and loan growth is weak, pressure should be expected on commercial banks to raise lending rates and limit demand for credit.

Even if prudential requirements are gradually moving towards international standards, compliance-related deficiencies in the banking system persist, as is reflected by the loss of dollar- correspondent banking relationships with international banks[15]. Angolan banks have suffered from a loss of correspondent banking services, such as dollar clearing services and the sale of physical dollar notes, as foreign banks seek to avoid money laundering and terrorism financing compliance-related risks.

There has been some progress in addressing these risks. In 2016, the Financial Action Task Force (FATF) recognized that Angola has made significant progress in improving its regime to combat money laundering and terrorist financing and therefore will no longer be subject to the FATF’s monitoring process. However, opacity remains a source of concern (timely data are scarce) and still prominent government ownership in the sector also triggers governance issues. Therefore, we do not expect dollar-correspondent banking services to resume in the short term.

Additionally, an inadequate legal framework for secured lending that includes impediments to enforcing property ownership hinders banks' financing activities. High levels of corruption also tend to make the operating environment both unpredictable and costly.

Despite some progress related to regulatory framework supervision and improving financial indicators, systemic credit risk in Angola’s banking system remains very high in the medium term.

The election of Joao Laurenço has been followed by a lot of expectation for a political transition ending the Dos Santos extensive patronage network as well as changing the economic policy.

The signing of a financing agreement with the IMF would diversify the sources of international financing and definitively reassure economic agents. But the balance between the need for reform and the social acceptance of austerity measures is very fragile.

The private sector’s supportive measures implemented last year by president Lourenço are intended to improve the business environment and attract international investors. But, important deficiencies remain (corruption issues, institutional weaknesses, weak human capital and still underdeveloped infrastructures) that would constrain the overall economic activity.

The main risk is that Angola's economy continues to be driven by the hydrocarbon sector as a source of GDP growth, fiscal income and foreign exchange earnings. This leaves the country vulnerable to the risks of low oil price and decrease in production levels. Therefore, growth recovery would be gradual and the still weak foreign direct investment and portfolio investment would oblige the country to rely on external debt financing.


[1]Enterprises up for total or partial privatization include the country’s ports, the national airline (TAAG), the Bank of Commerce and Industry (BCI) and the Ensa insurance company.

[2]As evidenced by Angola's low score (167th out of 180 countries) in the Transparency International's Corruption Perception's Index.

[3] Located 260 km from the Luanda coast, this is the biggest deep-water oil project in Angola with two production and storage units. Overall production is estimated to be about 230,000 b/d. Today the first FPSO (floating production storage and offloading) has been ramping up production since August 2018 while its second FPSO is expected to be operational before the summer of 2019.

[4] Except that the tax will be applied to the 373 companies described as major contributors for a period of two years before rolling out more widely.

[5] According to IMF, Angola uncollateralized loan agreements with several creditors (including Credit Agricole, KFW,Commerzbank, UKEF, Afreximbank, and China’s ICBC and Eximbank) amount at about USD 7 billion, i.e. 16% of total external debt in 2018).

[6] Angola has succeeded in maintaining good relations with China, securing a new USD 2 bn loan from the state-owned China Development Bank in October 2018.

[7] In 2017 the government introduced price limits for basic goods, centralised flour sales and recently approved a new set of customs tariffs.

[8] The parallel market was already the norm in many transactions.

[9] Approved in 2012, the legislation on foreign-exchange controls rules covers the trade of goods, services and capital movements arising from the overall crude oil and natural gas processes. The exchange operations encompass (i) the purchase and sale of foreign currency, (ii) the opening of foreign currency bank accounts in Angola by resident or non-resident entities and the transactions carried out through these bank accounts, (iii) the opening of national currency bank accounts in Angola by non-resident entities and the transactions carried out through these bank accounts and (iv) the settlement of all transactions of goods, services and capital movements. In general terms, these rules imposed on upstream oil and gas companies provide that (i) all foreign-exchange transactions must be carried out through Angolan banks and (ii) the bank accounts opened in Angolan banks must be funded sufficiently to satisfy tax obligations and the purchase of all goods and services from local and foreign companies.

[10] Banco Angolano de Investimentos, Banco Econômico, Banco de Fomento Angola, Banco BIC Angola and Banco de Poupança e Crédito.

[11] He was already BNA governor between 2010 and 2014.

[12] Four-fifths of the banking system’s NPLs were concentrated in the state-owned Banco de Poupança e Crédito (BPC) - a systemically important bank whose rescue package has cost the government an estimated 1.6% of GDP between March 2018 and January 2019. The BPC has resumed lending but remains weakly capitalized and dependent on the BNA for liquidity.

[13]Set up in 2016 by the government with a market capitalization equivalent to USD 2 billion, Recredit is a state-owned enterprise whose priority is the renegotiation of debt with banks and individuals with which it has agreements to purchase non-performing loans. Beyond that, however, the authorities have little capacity to intervene in the banking sector should it need to support a failing institution.

[14] On June 26 2018, the central bank suspended the board of Banco Angolano de Negócios e Comércio (BANC) and appointed a provisional team of directors due to the bank’s inability to meet the capital requirement. On January 2 (2019), the central bank announced that Banco Mais and Banco Postal had failed to meet the legal requirements to continue banking activity and revoked their licenses.

[15] US banks terminated banking relationships with their Angolan counterparts in 2015 and deprived them of access to dollars because of the suspicion that they were controlled by political interests.

THE EXPERT ECONOMISTS WHO PARTICIPATED IN THIS ARTICLE

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