IMF Executive Board Concludes the Second Post-Program Monitoring with Angola

LUANDA, Angola, March 19, 2014/African Press Organization (APO)/ On March 5, 2014, the Executive Board of the International Monetary Fund (IMF) concluded the Second Post-Program Monitoring with Angola.

Macroeconomic performance in 2013 reflected a marginal increase in oil production and a moderation of non-oil growth compared to previous years’ growth rates. Overall real GDP growth is estimated to have decelerated to 4.1 percent, down from 5.2 percent in 2012. Growth in the non-oil sector was held down by the agricultural sector’s slow recovery from the drought that affected large parts of the country in 2012, but is still expected to have reached 5.8 percent in 2013 due to government spending bolstering performance in the construction and power sectors. Inflation, after reaching single digits for the first time in decades at end-2012, declined to 7.7 percent by end-2013, comfortably below the authorities’ 9 percent target. The favorable inflation performance allowed the Monetary Policy Committee of the National Bank of Angola (BNA) to reduce its policy rate by 100 basis points cumulatively throughout 2013, a bit less than the decline in inflation. Gross international reserves stood at US$33.2 billion at end-December 2013, the equivalent of about 7 months of projected 2014 imports.2

Preliminary fiscal data indicate that Angola returned to a fiscal deficit for the first time since 2009, reflecting a sharp decline in oil revenue, while non-oil revenue and investment expenditure fell short of their targets. The fiscal surplus, which had reached 5.1 percent of GDP in 2012, is expected to have turned to a deficit of about 1½ percent of GDP in 2013. To finance the deficit and pay down domestic arrears, Angola drew down its government deposits from the equivalent of about 5 months of domestically-financed government expenditure to around

4 months. As a result of arrears repayments, total public debt is estimated to have declined to about 27 percent of GDP.

Three significant institutional reforms were introduced in 2013. First, a new oil-sector foreign exchange law was implemented. The law requires oil firms to channel payments through the domestic banking sector and to settle payments to resident suppliers in domestic currency. The legislation has helped deepen Angola’s financial markets and aided with the de-dollarization process. The second was the launch of Angola’s sovereign wealth fund, the Fundo Soberano de Angola (FSDEA), which will be funded from some of the proceeds previously allocated to the Oil for Infrastructure Fund. Part of the funds from FSDEA will be invested in infrastructure projects with the objective of reducing bottlenecks and supporting growth. The third was the legislative package which introduced, as part of the 2014 budget, a legal definition of arrears and a new procedure requiring the co-signature of the Ministry of Finance for authorizing investment expenditure. These measures, along with institutional capacity building efforts, are intended to address the recurrence of domestic arrears.

The pace of economic activity in 2014 is expected to accelerate gradually as public investment in infrastructure creates opportunities for non-oil sector growth. Non-oil sector growth is expected to reach 6.4 percent, underpinned by expanded investment in the power sector and road construction. The 2014 budget, if fully implemented, implies a further relaxation of the fiscal balance, with a projected increase in the overall fiscal deficit to about 5 percent of GDP to finance a sizeable expansion in public investment needed to address infrastructure bottlenecks. Efforts to ease infrastructure gaps, improve the business environment, and reform the financial sector are expected to support diversification and further non-oil sector growth. However, a rapid increase in government spending in 2014 may also contribute to renew price pressures, limiting the scope for further interest rate reductions.

Executive Board Discussion3

Executive Directors commended the authorities for Angola’s return to solid economic growth, with single-digit inflation, strong international reserves, and a stable exchange rate. However, they regretted the continued weaknesses in public financial management and called for decisive efforts to address arrears.

While recognizing the continued improvement in the non-oil primary deficit, Directors expressed concern that, based on preliminary data, the Angolan economy returned to an overall fiscal deficit in 2013. Directors stressed the importance of mobilizing domestic resources, especially non-oil revenue, and cautioned against permanent increases in government spending not accompanied by a broadening of the non-oil tax base, to avoid accumulation of debt. Directors also recommended replacing fuel subsidies with targeted transfers for the most vulnerable.

Directors commended the progress in reducing inflation, while advising continued readiness to address any inflationary pressures. They were encouraged by the decisive progress toward reform and better oversight of the financial system, in line with the recommendations of the Financial Sector Assessment (FSAP), as well as by the creation of a Financial Stability Committee. Directors noted that the implementation of the foreign exchange law has proceeded as planned, and underscored the need for continued careful monitoring, further strengthening of supervisory capacity, and enforcement of prudential rules. Directors saw merit in the creation of a sovereign wealth fund, but noted the need to clarify its objectives, integrate it into a broader asset-liability management strategy, and ensure an effective accountability and transparency framework. They commended efforts to improve compliance with international standards to combat money laundering and terrorist financing.

Directors underscored the importance of addressing key challenges for public financial management. They urged the authorities to strengthen their efforts to reconcile oil revenue data, ensure a timely and complete transfer of oil revenue to the treasury, and continue to make progress in integrating quasi-fiscal operations in the budget, including infrastructure expenditure undertaken by Sonangol. Directors noted the need to increase public investment in the context of enhanced efficiency of public expenditure and service delivery, while taking into account absorptive capacity. They encouraged the authorities to put in place reforms that will lead to higher, more inclusive, and diverse growth.

Directors expressed disappointment over the inaccurate reporting of data on domestic arrears during 2010 and accounts payable during 2011, which led to noncomplying disbursements and breach of obligations under Article VIII, Section 5. Directors noted that capacity constraints and the lack of a clear definition of arrears under Angola’s legal framework were among the factors contributing to this inaccurate reporting. They took note of the authorities’ corrective measures and new legislation clarifying the legal definition of arrears and requiring the co-signature of the Ministry of Finance on contracts for public investment projects. They underscored the need for resolute implementation of the corrective measures, firm commitment to ending recurrent domestic arrears, and further progress in strengthening public financial management, taking advantage of Fund technical assistance.

In view of the corrective actions taken by the authorities, the Executive Board decided to waive the nonobservance of the performance criteria, the conditions for granting prior waivers for nonobservance of performance criteria, and the prior action that gave rise to non-complying purchases by Angola following the second through sixth reviews under the 2009 Stand-By Arrangement, and determined that no further remedial action is required in connection with the breach of obligations under Article VIII, Section 5.


Angola: Main Economic Indicators, 2009–20141


2009    2010    2011    2012    2013    2014

Proj.    Proj.


Real economy (percent change, except where noted)

Real gross domestic product

2.4    3.4    3.9    5.2    4.1    5.3

Oil sector

-5.1    -3.0    -5.4    4.3    0.6    3.0

Non-oil sector

8.1    7.6    9.5    5.6    5.8    6.4

Nominal gross domestic product

-5.2    26.6    29.0    12.6    6.7    8.7

Oil sector

-25.4    27.6    36.7    8.2    -1.6    2.4

Non-oil sector

21.1    25.7    22.8    16.6    13.6    13.3

GDP deflator

-7.4    22.4    24.2    7.0    2.5    3.2

Non-oil GDP deflator

12.1    16.8    12.2    10.4    7.4    6.4

Consumer prices (annual average)

13.7    14.5    13.5    10.3    8.8    7.7

Consumer prices (end of period)

14.0    15.3    11.4    9.0    7.7    8.0

Gross domestic product (billions of kwanzas)

5,989    7,580    9,780    11,011    11,745    12,767

Oil gross domestic product (billions of kwanzas)

2,662    3,396    4,641    5,020    4,937    5,056

Non-oil gross domestic product (billions of kwanzas)

3,327    4,184    5,139    5,991    6,808    7,711

Gross domestic product (billions of U.S. dollars)

75.5    82.5    104.1    115.3    121.7    129.8

Gross domestic product per capita (U.S. dollars)

4,081    4,329    5,305    5,706    5,846    6,052

Central government (percent of GDP)

Total revenue

34.5    43.5    48.8    45.9    38.1    39.3

Of which: Oil-related

24.2    33.0    39.0    37.3    29.6    30.6

Of which: Non-oil tax

9.0    7.8    7.3    6.6    7.0    7.1

Total expenditure

41.9    40.0    40.2    40.8    39.6    41.3

Current expenditure

29.5    28.6    30.0    29.0    28.9    29.3

Capital expenditure

12.4    11.4    10.2    11.8    10.6    12.0

Overall fiscal balance (budget basis)

-7.4    3.4    8.7    5.1    -1.5    -2.0

Non-oil primary fiscal balance

-29.8    -26.2    -26.9    -28.6    -28.9    -30.1

Non-oil primary fiscal balance (Percent of non-oil GDP)

-53.7    -47.4    -51.1    -52.6    -49.9    -49.8

Money and credit (end of period, percent change)

Broad money (M2)

62.6    14.0    33.5    8.4    15.3    22.7

Percent of GDP

38.5    34.6    35.9    34.5    37.3    42.1

Velocity (GDP/M2)

2.6    2.9    2.8    2.9    2.7    2.4

Velocity (non-oil GDP/M2)

1.4    1.6    1.5    1.6    1.6    1.4

Credit to the private sector (12-month percent change)

59.5    25.0    30.4    24.2    10.9    11.0

Balance of payments

Trade balance (percent of GDP)

24.2    40.1    45.2    43.6    37.6    33.2

Exports of goods, f.o.b. (percent of GDP)

54.2    60.4    64.6    62.9    58.3    55.1

Of which: Oil and gas exports (percent of GDP)

52.8    58.8    62.3    61.5    56.8    53.6

Imports of goods, f.o.b. (percent of GDP)

30.0    20.2    19.4    19.4    20.7    21.8

Terms of trade (percent change)

-28.6    16.7    23.2    7.7    -2.8    -2.0

Current account balance (percent of GDP)

-9.9    8.1    12.6    9.2    5.0    2.2

Gross international reserves (end of period, millions of U.S. dollars)

13,238    19,339    28,396    33,035    33,154    33,931

Gross international reserves (months of next year’s imports)

4.5    5.3    7.0    7.5    7.0    6.9

Net international reserves (end of period, millions of U.S. dollars)

12,621    17,327    26,087    30,632    30,945    31,993

Exchange rate

Official exchange rate (average, kwanzas per U.S. dollar)

79.3    91.9    93.9    95.5    96.5    …

Official exchange rate (end of period, kwanzas per U.S. dollar)

89.4    92.6    95.3    95.8    97.5    …

Nominal effective exchange rate change (depreciation -)

-23.8    -5.0    -2.2    1.9    -1.2    …

Real effective exchange rate (depreciation -)

-14.6    7.4    4.9    9.5    5.9    …

Debt (percent of GDP)

External public sector debt (including IMF)

20.2    21.7    19.7    19.3    17.3    18.7

Total public sector debt (gross)

49.9    39.8    33.7    29.3    26.6    29.2


Oil production (millions of barrels per day)

1.809    1.755    1.660    1.731    1.742    1.794

Oil and gas exports (billions of U.S. dollars)

39.9    48.5    64.8    70.9    69.1    69.5

Angola oil price (average, U.S. dollars per barrel)

60.8    76.5    110.3    110.9    107.3    104.7

Brent oil price (average, U.S. dollars per barrel)

61.9    79.6    111.0    112.0    109.1    104.7

WEO oil price (average, U.S. dollars per barrel)

61.8    79.0    104.0    105.0    104.1    99.3


Sources: Angolan authorities and IMF staff estimates and projections.

1 The central objective of PPM is to provide for closer monitoring of the policies of members that have substantial Fund credit outstanding following the expiration of their arrangements. Under PPM, members undertake more frequent formal consultation with the Fund than is the case under surveillance, with a particular focus on macroeconomic and structural policies that have a bearing on external viability.

2 As of end-December 2012, reserves included US$7.4 billion earmarked for the Oil for Infrastructure Fund (OIF), of which US$5 billion are being gradually transferred over the course of 2013–14 to the Angolan Sovereign Wealth Fund (FSDEA for its acronym in Portuguese).

3 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:



International Monetary Fund (IMF)

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