The Executive Board of the International Monetary Fund (IMF) on Wednesday September 16, 2020 completed the third review of Angola’s economic program supported by an extended arrangement under the Extended Fund Facility (EFF) .
The IMF stated that “Completion of this review unlocks access to SDR 731.7 million (about US$1 billion), bringing total disbursements under the extended arrangement to SDR 1,804.7 million (about US$2.5 billion)”.
According to the Fund, “Angola’s three-year extended arrangement was approved by the IMF Executive Board on December 7, 2018 , in the amount of SDR 2.673 billion (about US$3.7 billion at the time of approval). It aims at restoring external and fiscal sustainability, improving governance, and diversifying the economy to promote sustainable, private sector-led economic growth”.
In completing the third review, the Executive Board also approved the authorities’ request for an augmentation of access under the EFF arrangement of 72 percent of Angola’s quota (SDR 540 million or about US$765 million) to support authorities’ efforts to control the spread of COVID-19 pandemic, mitigate its economic impact, and persevere with the implementation of structural reforms.
“Angola’s economy has been hit hard by a triple, COVID-19-induced external shock. The shock led to economic and health crises, compounded by the decline in oil prices in view of Angola’s dependence on oil exports. In response, the authorities have adopted decisive measures to tackle the impact of the shock, and they remain strongly committed to the program, including the fight against corruption”.
On the fiscal front, the National Assembly adopted a conservative supplementary budget, which includes non-oil revenue measures and compression of non-essential expenditure, while creating space for essential spending on health and the social safety net. On the monetary front, the central bank has adopted several measures to ease liquidity and credit constraints to help the private sector cope with the crises.
The Executive Board also approved the authorities’ request for waivers of non-observance and applicability of performance criteria and modification of some performance criteria, indicative targets, and structural benchmarks.
Following the Executive Board’s discussion on Angola, Ms. Antoinette Sayeh, Deputy Managing Director and Acting Chair, issued the following statement:
“The Angolan authorities remain committed to sound policies under the IMF-supported program despite a deteriorated external environment due to the COVID-19 pandemic, including negative impacts on public health, social protection, the budget, and public debt. The authorities have taken swift and decisive action, in response to lower oil exports and revenue, consistent with broad program objectives.
“The authorities adopted a conservative supplementary budget for 2020, taking measures to increase non-oil revenue, and reining in non-essential expenditure. Despite the crisis, fiscal consolidation will continue, while creating space for adequate spending on health and social safety nets. The authorities will also persevere with implementing measures to strengthen public financial management.
“The authorities have secured debt re-profiling agreements from several large creditors to reduce risks related to debt sustainability. Continued vigilance in managing public debt is critical to mitigate such risks in the context of heightened oil-price volatility.
“The National Bank of Angola (BNA) has continued to reform the exchange rate regime, including migrating the bulk of foreign exchange transactions to an electronic platform. Efforts should continue to remove constraints toward reaching a market-clearing exchange rate. The monetary stance has been eased to help counteract the impact of the COVID-19 pandemic and the oil-price shock. However, there is little room for further monetary easing and the BNA should stand ready to keep inflationary pressures in check.
“Timely implementation of banking sector recapitalization and restructuring is essential to address financial sector risks. In light of the shortfalls identified by the completed asset quality reviews, the authorities are preparing to address capital deficiencies and enhance credit risk management frameworks. The authorities need to advance the restructuring of two public banks. These efforts will be supported by the forthcoming BNA and Financial Institutions Laws, enabling the authorities to strengthen bank supervision and resolution.
“Pursuing structural reforms is critical to diversify the economy and lay the foundations for private sector-led economic growth. The Government will need to remain steadfast in enhancing the business environment, strengthening governance, and fighting corruption. “
