## 1. Determinants of Sovereign Spreads

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### Context and recent developments
- Volatility in oil exports and external financing conditions in 2025 highlighted Angola’s vulnerabilities to external shocks.
- Fiscal execution in 2025: expenditure exceeded the 2025 budget envelope driven by higher capital spending and fuel subsidy costs; revenues fell short largely due to lower oil prices and oil production.
- Sovereign spreads narrowed in H2 2025 relative to H1 2025, easing external liquidity constraints, but shortfall in oil exports and increased reliance on domestic debt financing of the fiscal deficit continue to put pressure on the kwanza.
- Progress on rebuilding buffers:
  - Public debt declined from its peak of 120 percent of GDP in 2020 to 51 percent of GDP in 2025.
  - Gross international reserves increased from $11 billion in 2020 to $15.9 billion at end-2025.
- Fiscal space has eroded due to declining primary surpluses and elevated debt service costs.
- National Development Plan (NDP) 2023–27 emphasizes human capital development and economic diversification; implementation has progressed more gradually than envisaged.

### Key macroeconomic indicators and near-term outlook
- Growth and production:
  - Real GDP growth: 5.0 percent in 2024 → 3.1 percent in 2025.
  - Average daily oil production: 1.10 million barrels per day in 2024 → 1.03 million barrels per day in 2025.
  - Non-oil real GDP growth: 5.2 percent in 2025; public spending was a key non-oil GDP growth driver.
  - Growth projections: 2.3 percent in 2026; medium-term growth projected at 3.1 percent, conditional on deep structural reforms.
- Inflation and monetary stance:
  - Peak inflation: 31 percent in July 2024.
  - Annual inflation: 15.7 percent in December 2025; 12.4 percent in March 2026.
  - BNA policy rate path: maintained at 19.5 percent through mid-2025; cuts 19.5 → 19.0 → 18.5 → 17.5 percent in Sep 2025, Nov 2025, Jan 2026 respectively; retained 17.5 percent at March 2026 meeting.
  - Real rates: about 4.5 percent (using the 12-month ahead inflation); short-term real neutral rate assessed at 2.5–3.5 percent.
- External sector and reserves:
  - BNA international reserves: $15.9 billion as of December 31, 2025 (about 7.4 months of imports); $15.8 billion (7.9 months of imports) at end-2024.
  - Current account: surplus narrowed from 5.3 percent of GDP in 2024 to 0.4 percent in 2025; projected to recover to 2.2 percent of GDP in 2026; medium-term expected to decline to about 0.6 percent of GDP.
  - NIIP: –12.5 percent of GDP (– $14.4 billion) at end-2024 → –15.0 percent of GDP (– $20.6 billion) at end-2025.
- Financial intermediation:
  - Private credit: about 6 percent of GDP; declined steadily over the past ten years.
  - NPL ratio: 16.7 percent in September 2025; declining since end-2024.
  - Banks’ exposure to government: over 30 percent of bank assets allocated to claims on the government.
  - AVISO-sponsored loans account for 70 percent of lending to private non-financial corporates.

### Determinants of sovereign spreads (empirical findings)
- Since inaugural Eurobond issuance in late-2015, Angola’s sovereign spreads have remained elevated relative to Sub-Saharan African peers.
- Key domestic macroeconomic determinants of spreads identified empirically:
  - Public debt ratio
  - Primary balance
  - Inflation
  - International reserves
- Good governance has the greatest impact in reducing spreads compared to various domestic and global factors.
- Policy implication: safeguarding macroeconomic stability and sustaining governance reforms are critical for economic diversification and for reducing external borrowing costs.

### Fiscal developments, 2025–26 budget measures, and fiscal risks
- 2025 fiscal performance:
  - Oil revenues contracted by 24.7 percent year-on-year in nominal U.S. dollar terms in 2025.
  - Average Angolan oil price in 2025: $67 per barrel (budget assumption: $70 per barrel).
  - Oil production in 2025: 1.03 million barrels per day (budgeted: 1.08 million barrels per day).
  - Fiscal deficit widened by 2.9 percentage points of GDP relative to 2024, reaching 4.1 percent of GDP in 2025.
- Expenditure slippage and subsidies:
  - Capital expenditure over-executed; estimated overspending about 0.9 percent of GDP (transition to GFSM 2014 complicates assessment).
  - Fiscal savings from diesel price increases in 2025 fell short by 0.7 percent of GDP; spending on fuel subsidies remained about 1.7 percent of GDP.
- Fuel subsidy reform (2023–25):
  - Diesel prices increased by 167 percent (from $0.16 per liter to $0.43 per liter) but remain well below international market prices (about $1.2 per liter).
  - Kwenda cash transfer expanded to over 1.4 million rural families; in May 2025 Kwenda entered second phase (through October 2029), increasing benefits from Kz8,500 to Kz11,000 per month.
- 2026 budget envisaged measures:
  - Budget envisages a 2.9 ppts of GDP reduction in primary expenditure relative to 2025 outturn.
  - Composition of envisaged reduction: 1.5 ppts of GDP in goods and services; 1.6 ppts of GDP in capital expenditure; 0.8 ppts of GDP in fuel subsidies.
  - Staff baseline incorporates a 2.1 ppts of GDP reduction in primary expenditure (reflecting implementation risks).
  - Primary balance: improves from -0.4 percent of GDP in 2025 to 1.3 percent of GDP in 2026.
  - Non-oil primary balance (NOPB) remains below the floor set under the FSL.
- Sovereign financing needs and debt dynamics:
  - Financing Needs (A) for 2025: 13.6 (Billions of U.S. dollars).
  - Financing Sources (B) for 2025: 8.4 (Billions of U.S. dollars). Financing Gap (A-B): 5.2 (Billions of U.S. dollars).
  - Total usable cash balances (2025): 0.4 (Billions of U.S. dollars); in months of expenditure: 0.5.
  - External debt rollover rate (2025): 47.1 percent.
  - Domestic debt rollover rate (2025): 167.7 percent.
  - Public sector debt (gross) (2025): 57.1 percent of GDP.
  - Public debt-to-GDP ratio declined to 51.3 percent in 2025 (other tables report 51.6 as prelim. 2025).
  - About 70 percent of debt is denominated in foreign currency.
  - Short-term debt (2025): 2.6 percent of GDP.
- Sovereign market access and operations:
  - Eurobond issuance: October 2025 raised $1.75 billion at an average yield of about 10 percent.
  - Eurobond issuance: March 2026 raised $2.5 billion (part for buying back a 2028 Eurobond and the rest to finance the 2026 budget).
- Central government–Sonangol nexus and accrual accounting risks:
  - Transition to GFSM 2014 reveals cross-debt and fiscal risks from Sonangol’s role in fuel subsidies and tax liabilities; Sonangol’s tax payable was not sufficient to cover fuel subsidy expenditures in 2024 under accrual accounting.

### Policy priorities and staff-recommended adjustment path
- Principal policy priorities:
  - Rebuild fiscal and external buffers while reducing oil dependency to lower sovereign spreads and external vulnerability.
  - Sustain and deepen governance reforms to achieve the largest reductions in sovereign spreads.
  - Advance domestic resource mobilization through improved tax administration, digitalization, and legislative reform (CIT and PIT).
  - Maintain prudent fiscal consolidation and expenditure control.
  - Continue tight monetary policy stance to anchor inflation expectations while monitoring exchange rate dynamics.
- Staff-recommended optimal policy mix and adjustment path:
  - Fiscal adjustment supported by exchange rate flexibility and a tight monetary policy stance.
  - Adjustment path: 2.2 ppts of GDP improvement in the primary fiscal balance over three years, combining a 3.0 ppts of GDP reduction in the NOPB, with the rest expected from an exchange rate adjustment responding to the structural decline in oil revenue.
  - Clear communication on fiscal policy objectives and a medium-term macroeconomic framework consistent with the FSL is key.
  - Mandatory evaluation of the FSL due in 2026 should preserve strong and credible fiscal anchors.

### Revenue mobilization and tax administration specifics
- Non-oil revenue measures and diagnostics:
  - Authorities streamlined tax codes and advanced digitalization (mandatory e-invoicing and tax filing).
  - Estimated yields of tax revenue to tax bases remain significantly lower than statutory rates:
    - Corporate income tax (CIT) collected in 2024: 9.1 percent of the estimated profit share of non-oil GDP (statutory CIT rate is 25 percent).
    - VAT collected in 2024: 2.3 percent of consumption and 9.1 percent of imports of goods and services.
  - Draft laws aim to reform CIT and PIT; staff baseline assumes moderate gains in non-oil revenues from administration and digitization efforts.
- Numerical tax and VAT items (table values for 2021–24 years shown in source):
  - Statutory CIT (oil sector % of profits): 29.5, 56.8, 29.4, 25.8.
  - Statutory CIT (non-oil sector % of profits): 12.1, 11.6, 9.4, 9.1.
  - Statutory CIT (non-oil sector excl. agriculture % of profits): 13.2, 13.1, 13.2, 13.0.
  - VAT (% of consumption): 4.3, 3.9, 3.1, 2.3.
  - VAT (% of imports of goods and services): 13.0, 13.6, 11.5, 9.1.
  - Footnotes: standard VAT rate has been 14 percent since 2019; reduced rates (7 percent and 5 percent) introduced since 2021 (effective January 1, 2022). Profits assumed: oil 50 percent of sectoral value added; non-oil 40 percent.

### Public investment, spending efficiency, and PFM reforms
- PFM reforms underway; weaknesses in cash management and arrears prevention persist.
- Ministry of Finance internal action plan to address 2019 PIMA recommendations; limited practical results beyond approval of new 2025 Public Investment Management Regulatory Framework and fine-tuning of processes.
- PFM Action Plan expected to support step-up in reforms.
- Public investment: prioritize and streamline projects to improve spending efficiency and achieve higher marginal returns.

### Monetary, FX, and financial sector policy guidance
- Monetary policy stance and transmission:
  - A tight monetary policy stance is important to sustain the disinflationary trend given still elevated inflation and rising global commodity price pressures.
  - Recommendations: maintain a mildly contractionary stance (current real policy rate about 4.5 percent) until inflation aligns with single-digit target; consider rate reductions once inflation continues a steady decline.
  - Improve monetary policy transmission: align interbank policy rate with BNA’s policy rate, develop secured lending and repo markets, and enhance central bank communication on liquidity forecasts and open market operations.
- FX market and exchange rate recommendations:
  - Facilitate greater exchange rate flexibility and price discovery to align the official exchange rate to a market-clearing rate.
  - Limit FX interventions to episodes of disorderly market conditions under a transparent, rules-based framework.
  - Strengthen FX market functioning by reducing market concentration, eliminating measures that hinder price discovery, and clearing interbank backlogs.
  - Develop FX derivatives market to enhance depth and resilience.
- Financial stability and macroprudential priorities:
  - Strengthen banking supervision with a more risk-sensitive, forward-looking approach; increase supervisory capacity and on-site inspections.
  - Operationalize bank resolution and the financial safety net; finalize DGF government backstop funding documentation.
  - Expand macroprudential toolkit to mitigate sovereign–bank linkages, FX risks, and household-sector vulnerabilities (e.g., LTV and DSTI limits).
  - Publish ELA framework in the medium term.
  - Address AML/CFT shortcomings to achieve timely exit from FATF grey list.

### Risk assessment, scenarios, and contingency guidance
- Major risks (likelihood / impact and mitigation highlights):
  - Geopolitical tensions: Likelihood: High; Potential Impact: High. Mitigation: fiscal consolidation, tighten monetary policy as needed, accelerate structural reforms.
  - Commodity price volatility: Likelihood: High; Potential Impact: High. Mitigation: fiscal consolidation, exchange rate as shock absorber, diversify exports.
  - Disorderly AI Correction (investor sentiment tightening): Likelihood: High; Potential Impact: High. Mitigation: diversify financing, strengthen financial regulation.
  - Rising social discontent: Likelihood: Medium; Potential Impact: High. Mitigation: scale up cash transfers, protect vulnerable groups, improve communication.
  - Climate change: Likelihood: Medium; Potential Impact: Medium. Mitigation: accelerate diversification and seek concessional financing for resilient infrastructure.
- Adverse scenario assumptions and impacts (Annex II):
  - Assumed oil prices: $67 per barrel on average in 2026, around $65 in 2027.
  - Oil production slowdown to 1 million barrels per day.
  - Projected impacts in 2026 under adverse scenario:
    - Government oil revenues shortfall: about $3.1 billion (2.3 ppts of GDP).
    - Oil exports decline: about $4.1 billion (2.9 ppts of GDP), pushing current account into deficit around 0.6 percent of GDP.
    - Oil sector contraction: 3.3 percent in 2026 (about 5 ppts below baseline recovery).
    - Overall GDP growth about 1.4 ppts lower.
    - Overall fiscal balance reduced by about 2.3 ppts of GDP.
  - Policy guidance: contain expenditure, allow exchange rate adjustment, tighten monetary policy as needed, protect social spending, accelerate privatization and reforms.
- Adjustment scenario:
  - Components: real exchange rate adjustment; fiscal consolidation combining expenditure containment and revenue enhancement; prolonged tight monetary policy.
  - Fiscal consolidation example: revenue-based consolidation of 1.1 percent of GDP in 2026 beyond the oil windfall.
  - Expected outcomes: improved primary balance consistent with FSL, public debt initially rise due to valuation effects then decline below baseline, stronger external buffers, reduced vulnerability to shocks.

### Debt sustainability and sovereign risk framework (Annex IV key points)
- Final assessment: Overall...High; Medium term: High; Long term: Moderate.
- Debt stabilization in baseline: Yes.
- Baseline public debt (percent of GDP) path:
  - Actual 2024: 51.3
  - Prel. 2025: 51.6
  - 2026: 53.5
  - 2027: 55.2
  - 2028: 56.6
  - 2029: 57.1
  - 2030: 57.7
  - 2031: 58.0
  - 2032: 58.8
  - 2033: 59.2
  - 2034: 59.4
- Gross financing needs (GFN) (percent of GDP) headline:
  - 2025: 19.3
  - 2026: 10.4
  - 2027: 10.6
  - 2028: 14.3
  - 2029: 13.5
  - 2030: 12.5
- Memo indicators:
  - Real GDP growth (percent): 3.1 (2024); 2.3 (2025); 2.6 (2026); 2.8 (2027); 3.0 (2028).
  - Inflation (GDP deflator; percent): 20.5 (2024); 8.4 (2025); 8.4 (2026); 8.4 (2027); 10.6 (2028).
  - Nominal GDP growth (percent): 24.3 (2024); 10.9 (2025); 11.2 (2026); 11.4 (2027); 13.9 (2028).
- Major vulnerabilities: elevated fiscal and oil sector risks; significant currency exposure with about 70 percent of public debt denominated in foreign currency; limited domestic debt market depth.
- Policy implications: sustain primary surpluses, maintain floating exchange rate, active debt liability management, mobilize non-oil revenues, and pursue economic diversification.

### Operational priorities and IMF engagement
- Key operational signals:
  - Prepare for a post financing assessment in 6 months given elevated IMF credit exposure (credit outstanding to IMF: SDR 2.5 billion as of Feb-2026).
  - Address 2025 fiscal widening and weak non-oil revenues to restore a positive primary balance.
  - Strengthen non-oil revenue mobilization and fiscal consolidation to support debt sustainability given public sector debt at 57.1 percent of GDP (2025).
  - Monitor bank exposure to government and preserve bank liquidity and capital buffers above regulatory minimums.
  - Support measures to stabilize oil export receipts and rebuild external buffers; projected improvements in 2026 are contingent on higher oil exports.
- IMF recommendation: next Article IV consultation for Angola to be held on the 12-month cycle; post financing assessment anticipated in 6 months given IMF credit outstanding.

*Source: Selected sections from "1. Determinants of Sovereign Spreads" and related annexes (IMF staff report excerpt).*

### 1. Determinants of Sovereign Spreads ____________________________________________________________ 7

### 1. Determinants of Sovereign Spreads ____________________________________________________________ 7

### Context
- Volatility in oil exports and external financing conditions in 2025 highlighted Angola’s vulnerabilities to external shocks.
- Budget execution data point to fiscal slippage in 2025: expenditure exceeded the 2025 budget envelope driven by higher capital spending and fuel subsidy costs, while revenues fell short largely due to lower oil prices and oil production.
- Sovereign spreads narrowed in the second half of 2025 relative to the first half, easing external liquidity constraints, but a shortfall in oil exports and increased reliance on domestic debt financing of the fiscal deficit continue to put pressure on the kwanza.
- Progress on rebuilding buffers:
  - Public debt declined from its peak of 120 percent of GDP in 2020 to 51 percent of GDP in 2025.
  - Gross international reserves increased from $11 billion in 2020 to $15.9 billion at end-2025.
- Fiscal space has eroded due to declining primary surpluses and elevated debt service costs.
- National Development Plan (NDP) 2023–27 emphasizes human capital development and economic diversification; implementation has progressed more gradually than envisaged.

### Recent economic developments (key findings)
- Growth:
  - Real GDP growth slowed from 5.0 percent in 2024 to 3.1 percent in 2025.
  - Average daily oil production declined from 1.10 million barrels per day in 2024 to 1.03 million barrels per day in 2025.
  - Non-oil real GDP grew by 5.2 percent in 2025; public spending was a key non-oil GDP growth driver.
- Inflation:
  - Peak inflation was 31 percent in July 2024.
  - Annual inflation declined to 15.7 percent in December 2025, the lowest since November 2023.
- External and reserves:
  - As of December 31, 2025, BNA international reserves were $15.9 billion (about 7.4 months of imports), compared to $15.8 billion (7.9 months of imports) at end-2024.
- Current account / saving–investment gap deteriorated in 2025, driven by a widening central budgetary government fiscal deficit and declining private sector saving–investment balance.
- Real appreciation of the kwanza since October 2024 contributed to a weaker current account.

### Outlook and risks
- Growth projections:
  - Growth projected at 2.3 percent in 2026.
  - Medium-term growth projected at 3.1 percent, conditional on deep structural reforms.
- Inflation outlook:
  - Inflation declined further in March 2026 to 12.4 percent and is expected to gradually align with the BNA's single-digit medium-term target, though risks remain from food and energy price pressures.
- Downside risks (tilted to the downside per Annex I):
  - Stronger-than-expected decline in oil prices or intensified spending pressures could reduce or eliminate projected net gains in fiscal space.
  - Domestic oil production challenges would further weaken fiscal and external positions and could lead to repricing of sovereign spreads or rollover risks in external markets.
  - Under an adverse scenario (Annex II), a reversion of oil prices to pre-Middle East war levels and oil production at 1 million barrels per day would result in significant economic impacts in 2026.
  - Deterioration in financing conditions could constrain development spending, exert additional pressure on the exchange rate, trigger private sector crowding-out, and provoke an inflation–depreciation spiral depending on monetary policy response.
  - Elevated spending ahead of the 2027 general elections, insufficient non-oil revenue mobilization, or delayed exchange rate adjustment could worsen fiscal and external outlook.
- Upside scenario:
  - Increased domestic oil production amid elevated oil prices, improved global sentiment, or regained reform momentum could bolster medium-term oil revenues and attract stronger non-oil FDI.

### Determinants of sovereign spreads (Box 1: empirical findings)
- Since the inaugural Eurobond issuance in late-2015, Angola’s sovereign spreads have remained elevated relative to Sub-Saharan African peers.
- Empirical analysis identifies the following key domestic macroeconomic determinants of spreads:
  - Public debt ratio
  - Primary balance
  - Inflation
  - International reserves
- Good governance is found to play a significant role and has the greatest impact in reducing spreads compared to various domestic and global factors.
- Policy implication: safeguarding macroeconomic stability and sustaining governance reforms are critical both for economic diversification and for reducing external borrowing costs.

### Policy discussions and fiscal stance
- 2025 fiscal performance:
  - Oil revenues contracted by 24.7 percent year-on-year in nominal U.S. dollar terms in 2025.
  - Average Angolan oil price in 2025 declined to $67 per barrel, below the budget assumption of $70 per barrel.
  - Oil production in 2025 was 1.03 million barrels per day, compared with the budgeted 1.08 million barrels per day.
  - Fiscal deficit widened by 2.9 percentage points of GDP relative to 2024, reaching 4.1 percent of GDP in 2025.
- Expenditure slippage:
  - Capital expenditure was over-executed.
  - Estimated overspending is about 0.9 percent of GDP (methodological caveat: transition to GFSM 2014 complicates precise assessment).
  - Fiscal savings from diesel price increases in 2025 fell short by 0.7 percent of GDP; spending on fuel subsidies remained about 1.7 percent of GDP.
- Fuel subsidy reform (Box 2: 2023–25):
  - Diesel prices increased by 167 percent (from $0.16 per liter to $0.43 per liter) but remain well below international market prices (about $1.2 per liter).
  - Fuel subsidy costs declined to levels lower than public spending on either health or education.
  - Mitigation measures included expansion of the Kwenda cash transfer to over 1.4 million rural families and distribution of fuel cards to taxi and bus drivers; rollout of urban fuel and fare cards faced delays.
  - Kwenda program: in May 2025 entered its second phase (through October 2029), increasing benefits from Kz8,500 to Kz11,000 per month.
- Domestic resource mobilization (Box 3: 2021–24):
  - Authorities streamlined tax codes and advanced digitalization (mandatory e-invoicing and tax filing) to boost compliance and collection; capacity development resources were deployed in revenue administration.
  - Estimated yields of tax revenue to tax bases declined and remain significantly lower than statutory rates:
    - Corporate income tax (CIT) collected in 2024 is 9.1 percent of the estimated profit share of non-oil GDP (statutory CIT rate is 25 percent).
    - Value-added tax (VAT) collected in 2024 is 2.3 percent of consumption and 9.1 percent of imports of goods and services (statutory VAT rates have been reduced from 14 percent to 5 percent in recent years).
  - Draft laws aim to reform corporate income tax (CIT) and personal income tax (PIT); staff baseline assumes moderate gains in non-oil revenues from administration and digitization efforts.

### Policy priorities implied by analysis
- Rebuild fiscal and external buffers while reducing oil dependency to lower sovereign spreads and external vulnerability.
- Sustain and deepen governance reforms to achieve the largest reductions in sovereign spreads.
- Advance domestic resource mobilization through improved tax administration, digitalization, and legislative reform (CIT and PIT) to diversify revenue sources.
- Maintain prudent fiscal consolidation and expenditure control to avoid further erosion of fiscal space and rising financing costs.
- Continue tight monetary policy stance to anchor inflation expectations while monitoring exchange rate dynamics to preserve external competitiveness.

*Source: Selected sections from "1. Determinants of Sovereign Spreads" (IMF staff report content).*

### 12.      The 2026 budget envisages a 2.9 ppts of GDP reduction in primary expenditure,

### 12.      The 2026 budget envisages a 2.9 ppts of GDP reduction in primary expenditure, 

### Fiscal adjustment and 2026 budget measures
- The budget envisages a 2.9 ppts of GDP reduction in primary expenditure relative to 2025 outturn to contain borrowing needs.
- Composition of the envisaged reduction:
  - 1.5 ppts of GDP reduction in spending on goods and services.
  - 1.6 ppts of GDP reduction in capital expenditure.
  - 0.8 ppts of GDP reduction in fuel subsidies.
- Staff baseline incorporates a 2.1 ppts of GDP reduction in primary expenditure—compared to the 2.9 ppts in the budget—reflecting implementation risks, including delays of fuel subsidy reform measures in the first quarter of 2026 and recent increases in imported fuel prices.
- Note: Part of the reduction relative to 2024—estimated at about 0.8 percent of GDP—is attributable to a projected decline in oil purchases used for debt service to Chinese creditors.

### Public Financial Management (PFM) reforms and risks
- PFM reforms are underway and will be stepped up; weaknesses in cash management and arrears prevention continue to pose risks.
- The Ministry of Finance adopted an internal action plan to address the 2019 Public Investment Management Assessment (PIMA) recommendations; limited practical results beyond:
  - approval of the new 2025 Public Investment Management Regulatory Framework, and
  - fine-tuning of processes (Selected Issues Paper on Taking Stock of Key Structural Reforms).
- PFM reforms expected to gain momentum supported by a PFM Action Plan.

### Fiscal stance, balances, and non-oil primary balance
- The 2026 fiscal stance is mildly contractionary:
  - Primary balance improves from -0.4 percent of GDP in 2025 to 1.3 percent of GDP in 2026.
- In the medium term, overall and primary balances are projected to decline under the baseline as the windfall fades.
- The non-oil primary balance (NOPB) remains below the floor set under the FSL, indicating the need for fiscal tightening.
- The revision of historical oil revenues under the GFSM 2014 framework led to a significant downward revision in the recorded non-oil primary balance; for 2024 the revision amounted to 3 ppts of GDP.

### Sovereign financing needs, debt, and vulnerabilities
- Risk of sovereign stress remains high, driven by elevated gross financing needs.
- Near-term financing needs have declined due to the oil price windfall but remain highly sensitive to international oil price developments; financing pressures projected to resume in the medium term due to high debt service obligations and weaker primary surpluses.
- Shrinking share of government FX revenues relative to GDP requires external adjustment, additional external borrowing, and/or proactive debt-liability management to avoid pressures on the domestic FX market and international reserves.
- Recent financing operations and liquidity management in 2025 helped close the financing gap:
  - Increased domestic borrowing, an FX bridge loan from the central bank, maturity extension of one-off commercial debt facility, and continued flexibility in drawing down escrow accounts under revised oil-collateralized debt agreed in late 2023.
- Eurobonds and market access developments:
  - Angola issued a Eurobond in October 2025, raising $1.75 billion at an average yield of about 10 percent.
  - Angola issued a Eurobond in March 2026, raising $2.5 billion; part was reported to be for buying back a Eurobond due in 2028 and the rest to finance the 2026 budget.
- Public debt dynamics:
  - Public debt-to-GDP ratio declined to 51.3 percent in 2025 despite the first recorded primary deficit in recent years.
  - In the baseline, the debt-to-GDP ratio is projected to increase in the medium term but remain below the 60 percent of GDP ceiling under the FSL.
  - About 70 percent of debt is denominated in foreign currency.
  - SOE-related debt is currently estimated at 1.8 percent of GDP and limited visibility of these exposures complicates projections and adds to fiscal risks.

### Fiscal risk: Central Government–Sonangol nexus
- Transition to accrual-based accounting under GFSM 2014 reveals fiscal risks from financial arrangements with SOEs.
- Sonangol implements fuel subsidies: exports oil, imports refined petroleum products, sells domestically at below-market prices, with government reimbursing the difference.
- Sonangol accumulates tax liabilities to the central government on its oil-related activities while the central government incurs obligations to Sonangol for fuel subsidies without needing to raise cash.
- Under accrual basis, Sonangol’s tax payable to the central government (row (3) in the table) was not sufficient to cover fuel subsidy expenditures in 2024; State Budget had not been capturing these financial arrangements, leaving cross-debt opaque.
- The transition to GFSM 2014 has helped improve transparency and accountability of fuel subsidies and fiscal risk management.

### Policy recommendations and optimal adjustment path
- Fiscal efforts remain critical to durably contain financing needs and reduce debt vulnerabilities.
- Staff-recommended optimal policy mix:
  - Fiscal adjustment supported by exchange rate flexibility and a tight monetary policy stance.
  - Adjustment path entails a 2.2 ppts of GDP improvement in the primary fiscal balance over three years, combining a 3.0 ppts of GDP reduction in the NOPB, with the rest expected from an exchange rate adjustment responding to the structural decline in oil revenue.
  - Substantial improvements via exchange rate adjustment make the path to reducing debt-to-GDP credible despite an initial increase driven by exchange rate valuation effects.
- Clear communication about fiscal policy objectives and a medium-term macroeconomic framework consistent with the FSL is key to maintaining credibility and effectiveness.
- The mandatory evaluation of the FSL due in 2026 should preserve strong and credible fiscal anchors.

### Fuel subsidy reform
- Fuel subsidy reform should remain a top priority, supported by active communication and social safety nets to protect vulnerable groups.
- Given high fuel subsidy costs despite recent decline, aligning fuel prices with international market prices remains important.
- Implementation challenges include strengthening social protection mechanisms and developing a clear, timely communication strategy.
- Authorities plan to reduce fuel subsidies without changing pump prices; the price of fuel for producers will no longer be subject to subsidies.

### Domestic resource mobilization (oil and non-oil)
- Oil revenue:
  - With persistent oil production challenges and medium-term downward oil price pressures, authorities should carefully evaluate effectiveness of current incentive schemes and rigorously assess risks that changes to oil revenue taxation could pose to revenue performance.
- Non-oil revenue:
  - Non-oil revenue should bear the brunt of adjustment efforts given structural challenges in oil production.
  - If the increase in the income tax exemption threshold under the 2026 budget results in larger-than-expected revenue loss, authorities should be ready to implement compensatory measures.
  - Recommendations to support non-oil revenue mobilization:
    - (i) Scale up and broaden digitization effort to improve tax compliance and reduce evasion.
    - (ii) Revisit VAT border arrangements and VAT exemptions.
    - (iii) Further harmonize CIT rates.
    - (iv) Take stock of tax arrears and explore mechanisms for their reduction.
    - (v) Rationalize tax incentives to reduce tax expenditure.
- Numerical tax and VAT items reported in source:
  - Statutory CIT (oil sector % of profits): 29.5, 56.8, 29.4, 25.8 (years shown in table header 2021–24).
  - Statutory CIT (non-oil sector % of profits): 12.1, 11.6, 9.4, 9.1.
  - Statutory CIT (non-oil sector excl. agriculture % of profits): 13.2, 13.1, 13.2, 13.0.
  - VAT (% of consumption): 4.3, 3.9, 3.1, 2.3.
  - VAT (% of imports of goods and services): 13.0, 13.6, 11.5, 9.1.
  - Footnote: The standard VAT rate in Angola has been 14 percent since 2019; reduced rates (7 percent and 5 percent) introduced since 2021 (effective January 1, 2022).
  - Footnote on profit assumptions: Profits for oil and non-oil sectors are assumed at 50 percent and 40 percent of sectoral value added, respectively.

### Public investment, spending efficiency, and PIMA
- Public investment spending should be further prioritized and streamlined to ensure efficient resource allocation.
- Significant scope remains to improve spending efficiency.
- Renewed commitment to comprehensive PFM reforms is welcome; addressing remaining PIMA recommendations is vital to enhance spending efficiency and strengthen prioritization.
- Achieving an appropriate balance across spending areas is essential to ensure higher marginal returns.

### Short-term financing and debt management
- Short-term financing pressures should be addressed through prudent debt management practices.
- Recommendations:
  - Proactive liability management.
  - Broaden domestic investor base and extend maturities in line with the Medium-Term Debt Strategy.
  - Prioritize low-cost financing, including from IFIs, and deepen the local government bond market.
  - Exceptional borrowing from the BNA should remain compliant with the existing central bank law.
  - Complex debt operations involving contingent liabilities require careful risk assessment.

### SOE reforms and privatization
- SOE reforms need to continue, with further efforts to enhance monitoring of quasi-fiscal operations.
- Comprehensive SOE strategy needed to strengthen reporting, enhance oversight, and pursue restructuring where necessary to mitigate fiscal risks.
- Sustaining progress on privatization and divestment of state-owned assets is important to support private sector development and generate one-off revenues.

### Authorities’ views
- Authorities acknowledged fiscal risks from the structural decline in oil revenue and reiterated commitment to fiscal restraint to safeguard macroeconomic stability.
- They emphasized ongoing consolidation efforts under the approved 2026 budget and their plan to bring the NOBP closer to the FSL limit of -5 percent of GDP in 2026.
- Authorities consider planned expenditure adjustments credible and expect non-oil revenue mobilization efforts to deliver gains despite income bracket changes.
- Authorities highlighted infrastructure gaps in electricity, water, and sanitation, and the need to improve spending efficiency.
- They emphasized meeting financing needs through instruments with longer maturities and lower costs.
- In case of a rapid reversal in recent oil price gains, authorities noted liquidity buffers such as FX deposits, balances in a foreign escrow account, and the sovereign wealth fund, and prioritized meeting debt service obligations even if this requires cuts to current and capital expenditures.

### Monetary policy, inflation, and credit
- Staff considers the monetary policy stance to be mildly tight based on the projected 12-month inflation outlook.
- Year-on-year inflation reached 15.7 percent at end-2025, falling below the policy rate for the first time since 2023.
- BNA policy rate actions:
  - Maintained at 19.5 percent through mid-2025, then lowered to 17.5 percent in January 2026 after successive cuts: 19.5 → 19.0 → 18.5 → 17.5 percent in Sep 2025, Nov 2025, Jan 2026 respectively; retained 17.5 percent at March 2026 meeting.
- Money growth:
  - Declined to 3.3 percent year-on-year in September 2025, rebounded to 9.2 percent year-on-year in January 2026.
- Real rates are at about 4.5 percent (using the 12-month ahead inflation), while the short-term real neutral rate is assessed at 2.5–3.5 percent, implying a mildly contractionary stance.
- Private credit trends and financial intermediation:
  - Private credit is currently at about 6 percent of GDP and has declined steadily in the past ten years.
  - Real credit growth is expected to remain negative through 2025 before gradually recovering over the medium term.
  - Angola’s private credit remains persistently lower than both the SSA median and the average for EMDE oil exporters.
  - Financial inclusion and SME access to finance remain low; financial infrastructure including the credit bureau and movable collateral registry is not fully functional, constraining SME financing.

*Source: IMF staff report (excerpt).*

### 25.      Given still elevated inflation and rising global commodity price pressures, a tight

### 25.      Given still elevated inflation and rising global commodity price pressures, a tight

### Monetary policy stance and implementation
- Findings
  - A tight monetary policy stance is important to sustain the disinflationary trend given still elevated inflation and rising global commodity price pressures.
  - Maintaining a mildly contractionary monetary stance, corresponding to the current real policy rate of about 4.5 percent, is essential until inflation aligns with the authorities’ single digit target over the medium term.
- Recommendations / policy guidance
  - Reductions in the policy rate should be considered once inflation continues a steady decline.
  - Sustained efforts to enhance the monetary policy framework are essential to ensure that policy rate changes effectively influence market rates, lending conditions, and economic activity.
  - Continued coordination between the BNA and the Treasury to establish a robust interbank liquidity management system to align the interbank policy rate with the BNA’s policy rate and support smoother policy transmission.
  - Priorities: reduce interbank market fragmentation through secured lending and repo market development; improve central bank communication on liquidity forecasts and open market operations to strengthen monetary policy transmission.

### Financial intermediation and credit access
- Findings
  - Deepening financial intermediation and broadening credit access by improving financial infrastructure are essential to foster private sector-led growth.
  - The private credit bureau lacks access to robust and timely data.
  - The collateral registry has remained largely inoperative for several years.
  - Government-backed schemes and institutions have aimed to expand access to finance through subsidized credit but have been constrained by operational inefficiencies, weak risk management, overlapping mandates, and reliance on fiscal transfers (Box 5).
  - AVISO 10-sponsored lending has led to quasi-fiscal operations.
- Recommendations
  - Quasi-fiscal operations through AVISO 10-sponsored lending should be brought to the budgetary process to enhance transparency, improve the efficiency of allocation of public resources, and better manage fiscal risks associated with contingent liabilities and safeguard financial stability.
  - Enhance credit infrastructure to support private sector lending, particularly to SMEs.
- Authorities’ views
  - The BNA reaffirmed its strong commitment to reducing inflation and the goal of single-digit inflation over the medium term.
  - Authorities emphasized prudent, cautious, and contingent implementation of policy rate adjustments, maintaining a tightening bias to anchor inflation expectations and avoid premature easing.
  - The BNA will continue strengthening the monetary policy implementation framework with IMF technical assistance and acknowledged the need to enhance financial intermediation to support private sector credit, noting robust private credit growth in local currency lending.

### External position, FX pressures, and exchange market functioning
- Key statistics and projections
  - The current account surplus narrowed from 5.3 percent of GDP in 2024 to 0.4 percent in 2025, driven by a significant decline in the trade balance.
  - Lower crude oil exports: preliminary estimate of 17.2 percent of GDP in 2025 as opposed to 26.3 percent in 2024.
  - The current account surplus is projected to recover to 2.2 percent of GDP in 2026 on higher oil exports amid elevated global prices.
  - Over the medium term, the current account surplus is expected to decline to about 0.6 percent of GDP, as non-oil-led growth outpaces oil exports.
- Findings on FX market pressures
  - Pressure in the foreign exchange market is growing: high demand for foreign currency relative to supply at the prevailing rate, drop in FX earnings, and an increase in the central bank’s net claims on the government.
  - The ratio of local currency to foreign currency deposits has reached record highs in 2024.
  - While pressure is rising, the official exchange rate has been stable since end-2024.
- Exchange restrictions and MCPs (updates)
  - Eliminated: long-standing Article XIV restrictions on (i) availability of foreign exchange for invisible transactions (travel expenses) and (ii) unrequited transfers to foreign-based individuals and institutions.
  - Intensified (Article AVIII) measures: (i) 10 percent special contribution tax on cross-border payments and transfers for technical assistance service and consulting agreements by legal entities; (ii) 2.5 percent special contribution tax on cross-border payments and transfers to individuals for TA contracts, consulting agreements and family remittances. The tax base has been broadened to apply to most cross-border payments and transfers with limited exceptions.
  - New exchange restriction identified: undue delays in accessing FX for current international payments and transfers arising from the BNA’s imposition of FX pricing constraints combined with rationing, earmarking and prioritization of FX at the capped rate while not providing sufficient FX to clear the market.
  - Five MCPs identified that segment the FX market, including:
    - Treasury ad hoc sales of FX at an official exchange rate (BNA published bid price) in exchange of signed commitments for treasury bills.
    - Ad hoc special allocations to commercial banks at the BNG rate for earmarked purposes.
    - Imposition of strict price limits on the bidding rate at Bmatch for transactions between banks and exporters in the extractive sector.
    - Banks’ obligation to resell in the interbank market 30 percent of export proceeds purchased in the Bmatch at a controlled exchange rate (Bmatch purchase price plus up to 1 percent margin).
    - Chilling effect of the legal provision on FX market “speculation” punishable as a criminal offense which disincentivizes banks from raising OTC rates above tolerance margins (estimates range of 6 and 12 percent).
- Policy recommendations on FX
  - Facilitate greater exchange rate flexibility and price discovery to align the official exchange rate to a market-clearing rate.
  - FX interventions should be limited, transparent, and guided by a clear, rules-based framework to avoid delaying necessary adjustments and eroding reserves.
  - Strengthen FX market functioning by reducing market concentration, eliminating measures that hinder price discovery, and clearing interbank backlogs.
  - Adopt a coherent exchange rate policy consistent with a flexible exchange rate regime and develop the FX derivatives market to enhance market depth and resilience.
  - Strengthen central bank communication strategy to anchor expectations and improve confidence in the FX market.
  - Pursue structural reforms as concurrent requirements for achieving a full and durable FX adjustment, alongside prudent external financing strategies and reserve management.
- Authorities’ views
  - Authorities broadly concurred with staff’s external sector assessment and reiterated commitment to maintaining adequate reserve levels and building external buffers when conditions permit.
  - The BNA uses the EBA-Lite REER model more frequently to monitor exchange rate developments and relies on the CA model primarily after year-end.
  - Authorities acknowledged the importance of exchange rate flexibility to address excess demand and clear backlogs but expressed concerns about potential inflationary pass-through.
  - Authorities noted structural challenges: limited supply by few participants, lack of depth, dominance of the oil sector, and high margins charged by commercial banks.
  - Authorities reaffirmed commitment to implementing IMF TA recommendations to improve FX operations and deepen the market.

### Financial stability, banking sector vulnerabilities, and supervisory reforms
- System overview and vulnerabilities
  - The banking sector accounts for 87 percent of total financial sector assets and remains broadly sound while risks remain elevated with persistently high non-performing loans (NPLs) and intensifying sovereign-bank nexus.
  - The system-level liquidity appears adequate but banks’ heavy reliance on sovereign bonds for liquidity, depositor concentration, and FX liquidity shortages pose challenges.
  - NPL ratio: 16.7 percent in September 2025; declining since end-2024.
  - Net open position (NOP): current ratio at -38 percent as of the end of the third quarter of 2025.
  - Angola has one of the highest government-bank nexuses in the region (over 30 percent of bank assets are allocated to claims on the government).
  - AVISO-sponsored loans now account for 70 percent of lending to private non-financial corporates.
  - Stage 3 loans are significant, with a large amount remaining in that category for over 5 years and a large portion denominated in foreign currency.
  - Other issues: insufficient foreign exchange liquidity for some banks; persistent gaps in the AML/CFT framework that led to FATF grey listing in 2024 and inclusion on the EU’s high-risk third countries list for AML/CFT deficiencies in 2025.
- Progress and institutional developments
  - 2025 FSAP recognized reforms since 2011: enhanced regulatory and supervisory framework, designation of the BNA as resolution authority, formalization of BNA’s financial stability mandate, and establishment of regulators/supervisors for non-bank financial sector.
  - BNA revised its Domestic Systemically Important Banks (DSIB) methodology and published a new, streamlined list of DSIBs.
  - The BNA published the Methodological Note for Identifying Eligible Institutions for Application of DSIB Reserves and Requirement Calibration in December 2025.
- Policy recommendations
  - Strengthen banking supervision through a more risk-sensitive, forward-looking approach: increase supervisory capacity, frequency and depth of on-site inspections, and leverage technology for data quality and real-time risk monitoring.
  - Apply Basel standards proportionately, enhance governance, and integrate qualitative assessments to improve oversight effectiveness and resilience.
  - Operationalize bank resolution and the financial safety net: dedicate resources and build capacity for financial safety net functions.
  - Deposit Guarantee Fund (DGF) should finalize its government backstop funding with documented agreements.
  - BNA should finalize resolution plans for banks that could be systemic upon failure, including current problem banks, and refine contingency plans to support timely and coordinated crisis management actions.
  - Ensure emergency liquidity assistance (ELA) eligibility is limited to solvent and viable entities with adequate collateral and that ELA can be provided on a discretionary basis under robust safeguards (e.g., a government guarantee) to a systemic and viable bank within a realistic and time-bound resolution plan.
- Operational notes
  - Aviso-10/2024 (BNA’s Notice No. 10) offers relief on mandatory reserve requirements to encourage banks to lend to the private sector, and caps interest rates at 7.5–10 percent.
  - Resolution of one large bank is progressing guided by a plan; resolution of another problem bank has not progressed and continues to pose a contingent fiscal liability; a third bank is undergoing a restructuring program.

*International Monetary Fund — Angola country report excerpt*

### 40.      Strengthening Angola’s macroprudential framework is important to safeguard

### Strengthening Angola’s macroprudential framework is important to safeguard financial stability

### Macroprudential framework: findings and recommended actions
- Finalize a comprehensive policy structure for macroprudential policy and enhance institutional coordination through the Council of Supervisors of the Financial System (CSSF)’s strategic plan and regular interagency meetings.
- Improve data infrastructure and analytical capacity for:
  - robust systemic risk monitoring,
  - forward-looking assessments,
  - calibration of macroprudential tools.
- Expand the BNA’s toolkit to mitigate:
  - sovereign bank-linkages,
  - FX risks,
  - emerging vulnerabilities in the household sector, by strengthening the macroprudential toolkit in line with FSAP recommendations.
- Enhance borrower-based measures:
  - Loan-to-Value (LTV) limits,
  - Debt Service-to-Income (DSTI) limits,
  - strengthen institutional capacity to monitor compliance and assess macroprudential policies.
- Increase transparency and accountability:
  - timely publication of Financial Stability Reports,
  - systematic evaluation of policy effectiveness.
- Medium-term objective:
  - publish the ELA framework, covering eligibility criteria and solvency and viability requirements.

### AML/CFT and FATF-related priorities
- Active implementation of the FATF Action Plan remains a priority to ensure timely exit from the FATF grey list.
- Expedite progress by:
  - improving risk-based supervision of non-bank financial institutions and designated non-financial businesses and professions;
  - ensuring authorities have adequate, accurate and timely access to beneficial ownership information and that breaches to obligations are adequately addressed;
  - improving money laundering and terrorist financing investigations and prosecutions;
  - establishing an effective process to implement targeted financial sanctions without delay.
- The 2025 FSAP identified significant shortcomings in AML/CFT supervision of the banking sector.

### Authorities’ views on financial sector reforms and implementation
- Authorities signaled commitment to financial sector reforms to preserve financial stability and supported the findings of the 2025 FSAP.
- Planned actions highlighted by authorities:
  - develop an action plan to support implementation of FSAP recommendations;
  - develop a recruitment campaign for the BNA;
  - advance work on the draft macroprudential framework and the CSSF strategic plan;
  - focus on strengthening the supervision function through a more risk-sensitive, forward-looking approach;
  - continue current approach of monitoring a problem bank and using voluntary measures to limit legal risks to the BNA;
  - continue operationalizing the resolution regime and ELA regime;
  - progress AML/CFT reform to achieve timely exit from the FATF grey list.

### Economic diversification and sustainable growth: context and progress
- Authorities remain committed to advancing economic diversification and sustainable growth despite high dependence on oil and vulnerability to oil price volatility.
- Policy emphases include:
  - broad-based horizontal reforms to strengthen the business environment and close human capital and infrastructure gaps;
  - industrial policies aimed at import substitution and credit subsidies targeting agriculture and food processing;
  - infrastructure financing channeled to special economic zones and development corridors, notably the Lobito Corridor.
- Governance and anti-corruption progress:
  - Fiscal Governance:
    - Quarterly fiscal reports under the GFSM 20214 methodology started to be published in October 2025.
    - A comprehensive PFM reform action plan is expected to be adopted by the second half of 2026.
    - Publication of a medium-term fiscal framework and fiscal strategy reports alongside the budget is being institutionalized.
  - Extractive Industries Transparency Initiative (EITI):
    - Angola completed its validation process in June 2025.
    - Validation recognized progress (including publication of audited financial statements by extractive SOEs) and identified corrective actions (e.g., elimination of tax-payer confidentiality legislative provisions and need for more inclusive stakeholder engagement).
    - Authorities committed to developing an action plan ahead of the next EITI assessment in April 2028.
  - Regulatory Reform:
    - Legal reforms removed the state monopoly on electricity transmission to allow greater private sector participation.
    - The competition regulatory authority (ARC) has faced enforcement challenges for some divestiture orders and still lacks operational and financial autonomy.
  - Rule of Law:
    - Judiciary implementing a new strategic plan (2025–29) to strengthen judicial independence and improve efficiency, supported by a new Ombudsman Law approved in March 2025 and launching of virtual hearings.
  - Anti-corruption:
    - National Strategy for the Prevention and Repression of Corruption (2024–27) introduced codes of conduct, mandatory integrity training, and a multi-sectoral commission to oversee implementation.
    - Strategy yet to be fully operationalized; separate action plans being developed by IGAE (preventive measures) and PGR (repressive measures).
    - A new draft law establishing a central beneficial ownership registry has been submitted to Parliament.
    - No progress reported on facilitating access to asset declarations (ADs) of high-ranking officials and politically exposed persons (PEPs) and on the effectiveness of the whistleblower protection system.
    - On recovery of illicit assets, new recoveries expected once migration of the reporting system from the National Service of Asset Recovery website to that of PGR is completed.
    - The amount recovered remains at $19 billion as previously reported.

### Policy discussions and staff recommendations on reform priorities
- Strike a balance between addressing infrastructure gaps and boosting efficiency and productivity; prioritize low-cost reforms with positive demand effects given low growth and limited fiscal space.
- Complement large infrastructure investments with targeted initiatives in education, health, and workforce skills.
- Promote deregulation and competition, enhance financial openness by easing foreign exchange constraints, and streamline import licensing to improve access to critical production inputs.
- Address persistent challenges in accessing foreign exchange as they constrain attracting foreign investment and hinder diversification efforts.
- Maintain fiscal governance momentum:
  - timely and effective implementation of the approved PFM reform action plan;
  - address EITI corrective actions;
  - curb anti-competitive practices and strengthen autonomy of regulatory agencies (including allowing them to function with their own revenues as predicted by law);
  - fully operationalize the 2024 anti-corruption strategy through an effective implementation plan and governance structure under the multisectoral commission;
  - approve legislation establishing a beneficial ownership registry in a timely manner;
  - prioritize initiatives to facilitate access to ADs of high-ranking officials and PEPs and enhance whistleblower protections.

### Staff appraisal: macroeconomic outlook and policy advice
- Growth and near-term outlook:
  - Growth reached 3.1 percent in 2025—exceeding earlier projections—driven by resilient non-oil growth despite a decline in oil production.
  - Fiscal outlook projected to improve in 2026 with planned expenditure cuts under the budget and recent oil price increases.
  - Growth projected to decelerate in 2026, largely reflecting restrained public spending.
  - Inflation has eased from its peak and is projected to continue declining.
  - Near-term financing pressures have eased but are projected to re-emerge in the following years as oil production and prices are expected to decline.
- Fiscal policy:
  - Staff welcomes authorities’ resolve to adjust expenditure under the 2026 budget to reduce the fiscal deficit.
  - The 2026 fiscal stance is considered mildly contractionary, with the overall deficit expected below the debt-stabilizing levels.
  - Fiscal deficit projected to widen in following years as the windfall fades.
  - The non-oil primary balance remains below the floor under the FSL; a tighter fiscal stance is warranted to reach FSL targets.
  - Recommendations:
    - support fiscal adjustment with exchange rate flexibility and an appropriately tight monetary policy stance;
    - use oil windfall to reduce debt and build buffers;
    - allow the exchange rate to serve as an automatic stabilizer;
    - adhere to the 2026 budget envelope and contain it as a share of GDP in the coming years;
    - adjust pump prices to align fuel subsidies with market levels and remove wholesale fuel consumption from subsidy coverage;
    - complete the mandated evaluation of the FSL.
- Revenue mobilization and debt management:
  - Stronger progress on revenue mobilization remains critical; oil production incentives need careful weighing against near-term fiscal risks.
  - Mobilize revenues from large SOEs through privatization and improved oversight to strengthen tax collection.
  - Prudent debt management can mitigate near-term financing pressures; prioritize access to lower-cost financing, deepen the local government bond market, and reduce sovereign spreads in international markets.
- Monetary and FX policy:
  - Maintain a tight monetary policy stance to sustain disinflation; current stance assessed as mildly tight from a forward-looking perspective.
  - A sufficiently positive real interest rate required to bring inflation into the single-digit target range over the medium term.
  - Short-term liquidity management should aim to align interbank rates with the policy rate.
  - Gradual liberalization of the foreign exchange market is needed to eliminate distortionary exchange restrictions and multiple currency practices, address FX backlogs, and improve market functioning.
  - FX reforms should be implemented with exchange rate adjustment and with more transparent FX interventions; develop a rules-based FX intervention framework to support price discovery while safeguarding international reserves and addressing excessive exchange rate volatility.
  - Staff does not recommend approval of the identified Article VIII measures at this time.
- Financial sector stability and safety nets:
  - Certain aspects of the financial sector are resilient, but vulnerabilities persist; the sovereign–bank nexus has increased and warrants close monitoring.
  - Legal reforms have broadly aligned the BNA’s supervision and resolution frameworks with international best practices, but further progress is necessary.
  - Continued vigilance and readiness for decisive action through effective contingency planning is needed, particularly regarding the resolution of a large insolvent bank.
  - Authorities should aim to publish in the medium term its ELA Framework.
  - Prioritize operationalization of the financial safety net and finalize resolution plans for banks that could be systemic upon failure.
  - Given the decision to build the ex-ante resolution fund alongside the deposit guarantee fund, arrangements for government back-up funding for the deposit guarantee fund should be finalized and documented.
- Structural reforms for inclusive growth:
  - Achieving more rapid, sustainable, and inclusive growth requires broad-based structural reforms to attract foreign investment and ease domestic savings constraints.
  - Priorities include addressing governance vulnerabilities, streamlining business regulations, addressing FX access challenges, improving access to private sector credit, and addressing AML/CFT weaknesses to ensure timely exit from the FATF grey list.
  - Delays in operationalizing anti-corruption reforms risk undermining public trust, weakening reform ownership, and raising Angola’s cost of financing.

*Source: IMF staff assessment contained in the provided chapter excerpt.*

### 57.      Staff recommend that the next Article IV consultation for Angola be held on the

### Staff recommendation and IMF engagement timetable

### Key recommendation and near-term IMF actions
- Staff recommend that the next Article IV consultation for Angola be held on the 12-month cycle.  
- With Angola’s credit outstanding to the IMF amounting to SDR 2.5 billion (338 percent of quota) as of Feb-2026—exceeding both the SDR 1.5 billion and 200 percent of quota thresholds—a post financing assessment is anticipated in 6 months.  

*Source: IMF staff text and tables.* 

### Fiscal developments (summarized findings)
- Sovereign spreads narrowed significantly from the spike in May 2025.  
- The fiscal deficit for 2025 widened due to higher-than-budgeted expenditures.  
- Oil revenues continued to decline in 2025.  
- Non-oil revenues remain persistently weak.  
- Capital expenditure increased in 2025.  
- The fiscal position weakened in 2025, with the primary balance turned negative.  

### Financial sector developments (summarized findings)
- Credit to the private sector grew in nominal terms but remains low as a share of non-oil GDP.  
- Total deposits remained robust but their ratio to non-oil GDP has some declines.  
- Despite some declines in capital buffers, liquidity and capital ratios remained above regulatory minimums.  
- Foreign currency deposits and loans remained broadly stable.  
- Nonbanks' market share increased to 14 percent of total private sector loans in 2025Q4.  
- Banks’ exposure to the government remained elevated.  

### External sector developments (summarized findings and near-term outlook)
- The trade balance narrowed in 2025 amid lower oil export receipts but is expected to recover in 2026 on the back of higher oil exports.  
- The recovery in exports is projected to contribute to a higher current account surplus and stronger external buffers in 2026.  
- The financial account was broadly balanced in 2025 and is projected to record higher outflows in 2026, driven by an increase in net FDI outflows (a decrease in net incurrence of liabilities).  
- International reserves remained broadly stable in 2025 and are projected to increase modestly in 2026.  
- The REER appreciated, reflecting persistent domestic inflation pressures, while the NEER remained broadly stable.  

### IMF exposure and repayment capacity (selected figures from Table 8)
- Stock of existing and prospective Fund credit: SDR 2,526.9 (2025, Table 8 snapshot).  
- Fund obligations (2025): SDR 512.9 (Table 8).  
- Fund credit outstanding, in percent of quota (2025): 341.4 (Table 8).  
- Staff note the credit outstanding to the IMF amounted to SDR 2.5 billion (338 percent of quota) as of Feb-2026, exceeding both the SDR 1.5 billion and 200 percent of quota thresholds.  

### Fiscal financing and liquidity (selected operational figures)
- Financing needs for the Budgetary Central Government (2025): Financing Needs (A) = 13.6 (Billions of U.S. dollars).  
- Financing Sources (B) for 2025: 8.4 (Billions of U.S. dollars).  
- Financing Gap (A-B) for 2025: 5.2 (Billions of U.S. dollars).  
- Total usable cash balances (2025): 0.4 (Billions of U.S. dollars); in months of expenditure: 0.5.  
- External debt rollover rate (2025): 47.1 percent.  
- Domestic debt rollover rate (2025): 167.7 percent.  

### Public debt and debt service (selected indicators)
- Public sector debt (gross) (2025): 57.1 percent of GDP (Table 5).  
- External debt (2025): 42.8 percent of GDP (Table 5).  
- Short-term debt (2025): 2.6 percent of GDP (Table 5).  

### Key operational signals for authorities and creditors (implied priorities from staff analysis)
- Prepare for a post financing assessment in 6 months given elevated IMF credit exposure.  
- Address the 2025 fiscal widening driven by higher-than-budgeted expenditures and weak non-oil revenues to restore a positive primary balance.  
- Strengthen non-oil revenue mobilization and fiscal consolidation to support debt sustainability given public sector debt at 57.1 percent of GDP (2025).  
- Monitor bank exposure to government and continue to preserve bank liquidity and capital buffers above regulatory minimums despite recent declines.  
- Support measures to stabilize oil export receipts and rebuild external buffers, noting the projected improvement in 2026 contingent on higher oil exports.  

*Source: IMF staff report tables and figures for Angola (excerpts).*

### Annex I. Risk Assessment Matrix

### Annex I. Risk Assessment Matrix

### Risk assessment framework
- The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path.
- Likelihood categories: "low" = probability below 10 percent; "medium" = probability between 10 and 30 percent; "high" = probability between 30 and 50 percent.
- RAM distinguishes conjunctural shocks and scenarios (shorter horizon between 12 to 18 months) and structural risks (longer horizon).
- Non-mutually exclusive risks may interact and materialize jointly.

### Major risks, likelihoods, potential impacts, and mitigation measures
- Geopolitical Tensions
  - Likelihood: High
  - Potential Impact: High. "The direct impact of geopolitical tensions is limited. However, oil price volatility and shifts in global financial conditions—driven by investor sentiment toward emerging markets—could adversely affect Angola’s oil exports and external financing."
  - Mitigation measures:
    - "Pursue fiscal consolidation through both revenue mobilization and expenditure control to reduce the financing needs and build fiscal buffers."
    - "Tighten monetary policy as needed to control inflation while allowing exchange rate to function as a shock absorber and preserve external buffers."
    - "Accelerate structural reforms and support trade diversification through expanding trading partners, developing non-oil exports, and building a stronger services sector such as tourism, finance, and IT exports."

- Commodity Price Volatility
  - Likelihood: High
  - Potential Impact: High. "Angola is an oil-dependent economy. Commodity price volatility can lead to increased external and fiscal pressures and contribute to overall economic instability in the country."
  - Mitigation measures:
    - "Pursue fiscal consolidation through both revenue mobilization and expenditure control to build fiscal buffers."
    - "Tighten monetary policy as needed to control inflation while allowing exchange rate to function as a shock absorber and preserve external buffers."
    - "Accelerate structural reforms and support trade diversification through expanding trading partners, developing non-oil exports, and building a stronger services sector such as tourism, finance, and IT exports."

- Disorderly AI Correction
  - Likelihood: High
  - Potential Impact: High. "Swings in investor sentiment and financial conditions tightening in global market can exacerbate external financing pressures, increase exchange rate pressures and elevate the cost of servicing sovereign debt."
  - Mitigation measures:
    - "Pursue fiscal consolidation through both revenue mobilization and expenditure control to reduce the financing needs and build fiscal buffers."
    - "Tighten monetary policy as needed to control inflation while allowing exchange rate to function as a shock absorber and preserve external buffers."
    - "Diversify financing sources to reduce reliance on external financing and improve access to funding for domestic businesses."
    - "Strengthen financial regulation to increase resilience of banks to market shocks, including stricter capital requirements and stress testing."

- Rising Social Discontent
  - Likelihood: Medium
  - Potential Impact: High. "Social unrest is likely to disrupt policy implementation, hampering the government’s ability to execute fiscal consolidation measures and further undermining macroeconomic outcomes."
  - Mitigation measures:
    - "Strengthen fiscal policies to build robust financial buffers and allocate resources effectively to safeguard the most vulnerable populations."
    - "Scale up the cash transfer programs while enhancing efficiency to target the most vulnerable."
    - "Accelerate structural reforms particularly to improve governance and tackle corruption."
    - "Strengthen communication regarding the use of various policy levers to bolster public confidence in economic policies."

- Climate change
  - Likelihood: Medium
  - Potential Impact: Medium. "Angola is vulnerable to frequent shocks affecting agriculture and faces transition risks from declining global oil demand. Financial tail-risks may worsen with delays to transitioning to a less oil dependent economy. Climate shocks threaten food and water security, damage infrastructure and assets, and harm tourism."
  - Mitigation measures:
    - "Accelerate structural reforms to support economic diversification."
    - "Pursue fiscal consolidation to build fiscal buffers and create space for financing the green transition."
    - "Seek private and concessional financing from donors to support the development of climate-resilient infrastructure."

### Baseline, Adverse, and Adjustment scenarios — key elements and policy guidance

- Baseline scenario
  - Assumes continuation of current policy settings with no major reforms under the current external outlook.
  - "The oil windfall is projected to provide temporary relief to fiscal and external balances (thus alleviate short-term financing pressures and strain on gross international reserves) under the baseline."
  - Financing of the fiscal deficit remains a mix of domestic and external borrowing, "assuming the continued market access without major changes in sovereign spreads."
  - Under the baseline, fiscal policy would not be consistent with the Fiscal Sustainability Law (FSL), "as the non-oil primary balance remains below the -5 percent of GDP floor."
  - "The debt-to -GDP ratio is projected to remain below the 60 percent ceiling, but unaddressed parallel market spreads cloud the credibility of the debt trajectory."

- Adverse scenario
  - Purpose: highlight sensitivity to oil sector developments and inform robust policy advice.
  - Assumptions:
    - "Oil prices are assumed to reverse the recent gains following the war in the Middle East, to decline at a $67 per barrel on average in 2026, and further down to around $65 in 2027."
    - "Moderate intensification of domestic oil production challenges, with output slowing to 1 million barrels per day—around 5 percent below the baseline and at a lower end of the authorities’ target range."
    - "The scenario assumes a gradual recovery in the oil production toward the baseline levels over the medium term."
  - Projected impacts:
    - "Government oil revenues are projected to fall short of the baseline by about $3.1 billion (2.3 pp of GDP) under this scenario."
    - External sector: "Oil exports would decline by about $4.1 billion (2.9 ppts of GDP), pushing the current account into a deficit of around 0.6 percent of GDP."
    - Growth: "The oil sector would contract by 3.3 percent in 2026— about 5 ppts below the projected recovery of 1.6 percent growth under the baseline. Overall GDP growth would be about 1.4 ppts lower."
    - Fiscal outcome: "Both the direct impact of the oil revenue shortfall and the indirect effect through weaker non-oil sector growth would reduce the overall fiscal balance by about 2.3 ppts of GDP."
    - Exchange rate and reserves: "Depending on the BNA’s policy response, international reserves would decline, or the exchange rate would need to adjust more markedly. If exchange controls are further intensified to prevent exchange rate adjustment, parallel market spreads could widen, generating cost-push inflationary pressures and weighing on non-oil growth, including foreign investment."
  - Policy response guidance:
    - "The optimal policy mix remains broadly unchanged, with increased emphasis on containing expenditure in line with revenues to prevent the primary balance from deteriorating below 3.0 percent of GDP."
    - "Exchange rate adjustment should be critical to serve as a key shock absorber, complemented by monetary policy tightening as needed to contain second-round inflationary pressures."
    - "Preemptive policy efforts should focus on fiscal consolidation while protecting social spending and advancing structural reforms more decisively to promote growth and reduce public debt-to -GDP."
    - "Accelerating privatization to use proceeds for lowering debt and creating fiscal space while redirecting fuel subsidy savings toward poverty-reducing social spending also remain critical."

- Adjustment scenario
  - Components:
    - "(i) a real exchange rate adjustment, (ii) a fiscal adjustment with containing expenditure pressures at the baseline while enhancing revenues, and (iii) a tight monetary policy stance for longer to contain inflation expectations and support orderly exchange rate adjustment."
  - Fiscal consolidation specifics:
    - "The adjustment scenario envisages a revenue-based fiscal consolidation of 1.1 percent of GDP in 2026, beyond the oil windfall, with exchange rate adjustment contributing to higher oil revenues."
  - Expected outcomes:
    - Primary balance projected to improve "in consistency with the FSL to moderate financing needs and contain the public debt at around current levels."
    - "Public debt, while initially rising due to exchange rate valuation effects, is projected to decline rapidly as the economy expands and the fiscal position strengthens, stabilizing well below the baseline level over the medium term."
    - "External buffers would strengthen, financing needs would become more manageable, and public debt would decrease below 60 percent of GDP over the medium term–-in consistent with the FSL."
  - Policy implementation priorities:
    - "Clearly communicating medium-term fiscal objectives and a plan to restore FSL compliance will be essential to support market confidence and fiscal discipline."
    - "BNA’s monetary policy will need to effectively anchor inflation expectations and address excessive exchange rate volatility—should it threaten price and macroeconomic stability—through rules-  based FX interventions."
    - "Transitioning to a market-clearing exchange rate would also help phase out administrative controls on FX transactions and mitigate distortions in the private sector, supporting economic diversification."
    - "This scenario will reduce Angola’s vulnerability to shocks and put Angola on a path to sustainable private-sector led growth."

*Source: Annex I and Annex II (Risk Assessment Matrix and Scenario Analysis) of the provided IMF document.*

### Annex IV. Sovereign Risk and Debt Sustainability Framework

### Annex IV. Sovereign Risk and Debt Sustainability Framework

### Overall assessment
- Final assessment: Overall...High
- Near term: N (near-term assessment note: "The near-term assessment is not applicable in cases where there is a disbursing IMF arrangement. In surveillance-only cases or in cases with precautionary IMF arrangements, the near-term assessment is performed but not published.")
- Medium term: High
- Long term: Moderate
- Debt stabilization in the baseline: Yes
- Mechanical signal / DSA publication notes: "Not required for surveillance countries." "A debt sustainability assessment is optional for surveillance-only cases and mandatory in cases where there is a Fund arrangement. The mechanical signal of the debt sustainability assessment is deleted before publication."

### DSA summary and key vulnerabilities
- Liquidity / market access:
  - "Liquidity risks have eased following the successful return to market access, and the near-term financing needs have declined with projected oil windfall."
  - "Unaddressed parallel market spreads also cloud the credibility of the debt trajectory."
- Principal risks:
  - Elevated fiscal and oil sector vulnerabilities.
  - Revenue performance risks (oil and non-oil).
  - Significant currency exposure: "about 70 percent of public debt denominated in foreign currency."
  - Limited depth of domestic debt markets.
  - Large spending needs and declining oil revenues.
- Mitigating factors and policy levers:
  - "Sustained primary surpluses, a floating exchange rate regime, renewed market access, and an active debt liability management are expected to ease debt vulnerabilities."
  - Strong international reserves noted as a key buffer (though "not directly captured in the analysis").
- Staff narrative:
  - "Angola’s public debt has declined in 2025 benefiting from higher nominal GDP growth, and liquidity risks have eased somewhat following the successful return to market access. However, the risk of debt distress remains high, reflecting elevated fiscal and oil sector vulnerabilities and large debt service needs."

### Debt coverage and disclosures (coverage and reporting)
- Coverage perimeter: "The public debt perimeter covers domestic and external debt of the central government; the external debt of the state-owned oil company, Sonangol, and the state-owned airline, TAAG; public guarantees; and reported external liabilities of other state entities, including external arrears."
- Subsector inclusion (baseline):
  - Budgetary central government: Yes
  - Extra budgetary funds (EBFs): No
  - Social security funds (SSFs): Yes
  - State governments: Yes
  - Local governments: Yes
  - Public nonfinancial corporations: Yes
  - Central bank: No
  - Other public financial corporations: No
- Notes on recording and valuation: Definitions provided for nominal value, face value, market value, and proxies for arrears in the absence of accrual data.

### Public debt structure indicators (selected observations)
- Perimeter shown: general government (for currency, holder, instruments, maturity breakout charts).
- Baseline assumptions highlighted:
  - "(i) increased reliance on marketable debt in both external and domestic markets;"
  - "(ii) a moderate increase of domestic debt share of GDP (this also includes arrears); and"
  - "(iii) an improving maturity profile, reflecting the authorities’ ongoing efforts."
- Sonangol external debt projection: "Sonangol’s external debt is projected to decline from 1.8 percent of GDP in 2024 to 1.4 percent in 2029."
- Residual maturity: "12.3 years" (noted under maturity profile).

### Baseline scenario (selected figures, Percent of GDP unless indicated otherwise)
- Public debt:
  - Actual 2024: 51.3
  - Prel. 2025: 51.6
  - 2026: 53.5
  - 2027: 55.2
  - 2028: 56.6
  - 2029: 57.1
  - 2030: 57.7
  - 2031: 58.0
  - 2032: 58.8
  - 2033: 59.2
  - 2034: 59.4
- Change in public debt:
  - 2025: -3.7
  - 2026: 0.3
  - 2027: 1.9
  - 2028: 1.7
  - 2029: 1.3
  - 2030: 0.5
  - 2031: 0.6
  - 2032: 0.2
  - 2033: 0.8
  - 2034: 0.4
  - 2035: 0.2
- Contribution of identified flows:
  - 2025: -6.2
  - 2026: 0.2
  - 2027: 0.9
  - 2028: 1.0
  - 2029: 0.5
  - 2030: 0.4
  - 2031: 0.4
  - 2032: 0.4
  - 2033: 0.6
  - 2034: 0.3
  - 2035: 0.1
- Primary deficit:
  - Actual 2024: 0.4
  - 2025: -1.3
  - 2026: -0.2
  - 2027: 0.0
  - 2028: -0.1
  - 2029: -0.3
  - 2030: -0.3
  - 2031: -0.2
  - 2032: -0.2
  - 2033: -0.1
  - 2034: 0.0
- Noninterest revenues and expenditures (selected):
  - Noninterest revenues 2025: 14.4; 2026: 13.6; 2027: 13.6; 2028: 13.6; 2029: 13.5; 2030: 13.4; 2031: 13.3; 2032: 13.2; 2033: 13.1; 2034: 13.0
  - Noninterest expenditures 2025: 13.1; 2026: 13.5; 2027: 13.5; 2028: 13.4; 2029: 13.2; 2030: 13.1; 2031: 13.1; 2032: 13.1; 2033: 13.0; 2034: 13.0
- Automatic debt dynamics:
  - 2025: -5.4; 2026: 0.8; 2027: 0.6; 2028: 0.6; 2029: 0.2; 2030: 0.3; 2031: 0.3; 2032: 0.4; 2033: 0.5; 2034: 0.2; 2035: 0.0
- Gross financing needs (GFN):
  - 2025: 19.3
  - 2026: 10.4
  - 2027: 10.6
  - 2028: 14.3
  - 2029: 13.5
  - 2030: 12.5
  - 2031: 12.6
  - 2032: 13.6
  - 2033: 13.1
  - 2034: 13.3
  - 2035: 13.9
- Gross financing needs decomposition (debt service):
  - 2025: debt service 18.9
  - 2026: 11.7
  - 2027: 10.7
  - 2028: 14.4
  - 2029: 13.6
  - 2030: 12.8
  - 2031: 13.0
  - 2032: 13.8
  - 2033: 13.3
  - 2034: 13.4
  - 2035: 13.9
- Currency split of GFN:
  - Local currency (GFN): 10.8 (2025); 5.3 (2026); 4.5 (2027); 6.0 (2028); 5.9 (2029); 6.2 (2030); 6.0 (2031); 6.1 (2032); 6.2 (2033); 6.3 (2034); 6.6 (2035)
  - Foreign currency (GFN): 8.1 (2025); 6.4 (2026); 6.3 (2027); 8.4 (2028); 7.7 (2029); 6.7 (2030); 7.0 (2031); 7.7 (2032); 7.1 (2033); 7.1 (2034); 7.3 (2035)
- Memo indicators:
  - Real GDP growth (percent): 3.1 (2024); 2.3 (2025); 2.6 (2026); 2.8 (2027); 3.0 (2028); 3.0 (2029); 3.1 (2030); 3.1 (2031); 3.0 (2032); 3.0 (2033); 3.0 (2034)
  - Inflation (GDP deflator; percent): 20.5 (2024); 8.4 (2025); 8.4 (2026); 8.4 (2027); 10.6 (2028); 9.6 (2029); 9.4 (2030); 8.4 (2031); 8.7 (2032); 7.5 (2033); 7.7 (2034)
  - Nominal GDP growth (percent): 24.3 (2024); 10.9 (2025); 11.2 (2026); 11.4 (2027); 13.9 (2028); 12.9 (2029); 12.8 (2030); 12.1 (2031); 10.8 (2032); 11.0 (2033); 11.2 (2034)
- Baseline narrative: "Public debt declined in 2024 benefitting from higher nominal GDP growth and higher external debt repayment and is projected to stabilize around 63 percent in the medium term. This stabilization is driven by a primary surplus and nominal GDP growth. However, gross financing needs have increased reflecting weaker primary balance, and financing pressures became heightened."

### Realism of baseline assumptions (summary)
- Realism tool findings:
  - "The realism tool indicates a somewhat high probability of optimism in real growth projections, mainly reflecting the sustained momentum in non-oil growth despite expenditure restraint."
  - "The baseline over the next five years assumes relatively strong performance in the non-oil sector, contributing to a decline in the debt-to-GDP ratio."
  - "The three-year debt reduction and the improvement in the three-year primary balance are both broadly in line with their respective cross-country distributions."
- Comparator group: "Emerging Markets, Commodity Exporter, Surveillance."
- Noted percentile ranks and comparisons for public-debt-reducing flows, fiscal adjustment, and implied spread calculations (Laubach rule referenced for spread response).

### Medium-term risk assessment (indices and probabilities)
- Debt fanchart module:
  - Fanchart width (percent of GDP): 89.1 and contribution 1.3 (presented as "89.11.3 (percent of GDP)").
  - Probability of debt non-stabilization (percent): 29.2 and contribution 0.2 ("29.20.2").
  - Terminal debt-to-GDP x institutions index: 46.9 and contribution 1.0 ("46.91.0").
  - Debt fanchart index (DFI): 2.6
  - Risk signal: High (note: "The signal is low risk if the DFI is below 1.13; high risk if the DFI is above 2.08; and otherwise, it is moderate risk.")
- Gross Financing Needs (GFN) module:
  - Average baseline GFN (percent of GDP): 12.3 and contribution 4.2 ("12.34.2 (percent of GDP)").
  - Initial banks' claims on the general government (pct bank assets): 21.6 and contribution 7.0 ("21.67.0 (pct bank assets)").
  - Change in banks' claims in stress (pct banks' assets): 35.6 and contribution 11.9 ("35.611.9").
  - GFN financeability index (GFI): 23.1
  - Risk signal: High (note: "The signal is low risk if the GFI is below 7.6; high risk if the DFI is above 17.9; and otherwise, it is moderate risk.")
- Medium-term index and probabilities:
  - Medium-term index: High (composed of DFI and GFI contributions)
  - "Final assessment: Prob. of missed crisis, 2026-2031, if stress not predicted: 72.7 pct."
  - "Prob. of false alarms, 2026-2031, if stress predicted: 3.4 pct."
- Narrative: "Given the 2023 shock that led to a significant increase in the debt-to-GDP ratio, and high historical volatility of key macroeconomic variables, the debt fan chart continues to indicate a high level of risk. The Gross Financing Needs (GFN) tool also signals a high level of risk, reflecting elevated projected gross financing needs, a heightened sovereign–bank nexus, and relatively limited domestic debt absorption capacity if access to external markets are curtailed. Government buffers are partially incorporated into the GFN module’s stress scenario, cushioning the impact under the hypothetical shock. Strong international reserves, though not directly captured in the analysis, remain a key buffer and a risk mitigator."
- Major contingent liability risks identified: "state-owned enterprises (SOEs), the pending restructuring of a problem bank (estimated at about 1 percent of GDP), and collateralized loans."

### Long-term risk assessment (summary and scenarios)
- Long-term modules and scenarios summarized:
  - Alternative baselines: medium-term extrapolation; medium-term extrapolation with debt stabilizing; historical average assumptions.
  - Commentary: "Using the historical ten-year average, Angola's debt-to-GDP and GFN-to-GDP ratios are predicted to increase significantly. Sound debt management, fiscal consolidation, mobilization of non-oil revenues, and diversification efforts will be important to contain these fiscal vulnerabilities in the long-run."
  - Natural resources module commentary: "This 'natural resources' module highlights the sensitivity of the debt outlook to natural resource depletion. The authorities are making efforts to boost exploration and foreign investment in the crude oil sector as well as in the oil refinery sector. However, the long-term debt outlook still hinges on diversification efforts and non-oil revenue mobilization."
- Debt-stabilizing policy lever referenced: "DSPB: DebtStabilizing Primary Balance."

### Policy implications and recommendations (drawn from analysis)
- Short- and medium-term policy priorities emphasized:
  - Sustain primary surpluses.
  - Maintain a floating exchange rate regime.
  - Preserve and deepen renewed market access.
  - Implement active debt liability management.
  - Strengthen debt management capacity.
  - Fiscal consolidation and mobilization of non-oil revenues.
  - Economic diversification to reduce oil-dependency.
- Liquidity and market implications:
  - As reliance on market financing increases, "higher interest costs will become a major driver of the debt trajectory."
  - "Successful return to international markets somewhat eased liquidity pressures. However, as reliance on market financing increases, higher interest costs will become a major driver of the debt trajectory."

*Source: Fund staff.*

### 3.      The government and the BNA use three instruments to ease access to finance to SMEs:

### 3.      The government and the BNA use three instruments to ease access to finance to SMEs:

### Instruments to ease SME access to finance
- The government and the BNA use three instruments:
  - (i) state-owned lenders that channel subsidized credit;
  - (ii) administrative measures directing bank lending to priority sectors; and
  - (iii) credit guarantees.
- Examples and fiscal backing:
  - Lending by the Development Bank of Angola (BDA) and Agriculture Development Support Fund (FADA) fall under (i) and funding is backed by the budget.
  - AVISO-10-sponsored credits by banks fall under (ii); banks offering low-interest credit receive a relief on mandatory reserve requirements from the BNA.
    - About 60 percent of new loans are AVISO-10-sponsored loans.
  - Lending by banks with a guarantee from the Credit Guarantee Fund (FGC) or the Agri Credit Campaigning (CCA) fall under (iii) and are heavily dependent on fiscal transfers.
- Fiscal cost note:
  - All three instruments incur explicit or implicit fiscal costs.

### Annex VI — Overall External Sector Assessment (2025)
- Overall assessment:
  - Angola’s external position in 2025 is assessed to be moderately weaker than the level implied by fundamentals and desirable policies.
  - Drivers: impact of lower oil production and subdued international oil prices; limited exchange rate flexibility since late 2024.
- Potential policy responses (priority areas):
  - Allow greater exchange rate flexibility;
  - Maintain adequate international reserves;
  - Limit foreign exchange interventions to episodes of disorderly market conditions under a transparent, rules-based framework;
  - Fiscal consolidation to reduce reliance on external borrowing;
  - Strengthen debt management and contain inflation;
  - Improve access to credit and advance structural reforms to diversify exports and enhance competitiveness.

### Foreign assets and liabilities: position and trajectory
- Background trajectory:
  - NIIP deteriorated from –12.5 percent of GDP  (– $14.4 billion) at end-2024 to –15.0 percent of GDP (–$  20.6    billion) at end-2025.
  - Gross external liabilities rose from $64.8 billion to $75.0 billion.
  - External assets grew from $50.4 billion to $54.4 billion.
- Assessment:
  - NIIP remains negative but external balance sheet is assessed to be broadly stable.
  - Risks partially mitigated by external buffers, including oil-related assets in offshore escrow accounts.
  - Growing reliance on external borrowing warrants monitoring of maturity structure, currency composition of liabilities, and reserve adequacy.

### Current account
- Background and levels:
  - CA shifted from a strong surplus in 2024 (4.1 percent of GDP) to broadly balanced in 2025, with a surplus of 0.4 percent of GDP.
  - Drivers: weaker oil exports due to prolonged maintenance operations in oil fields and lower international oil prices in the first half of the year.
  - Medium-term expectation: CA expected to gradually stabilize to 0.6   percent of GDP.
  - Risks: tilted to the downside given oil price volatility and production uncertainty.
- EBA-lite model results, 2025 (in percent of GDP):
  - CA-Actual 0.4
  - Cyclical contributions (from model) (-) 0.1
  - Additional temporary/statistical factors (-) 2/
  - Natural disasters and conflicts (-) 0.0
  - Adjusted CA 0.3
  - CA Norm (from model) 2/ 1.4
  - Adjustments to the norm (+) 0.0
  - Adjusted CA Norm 1.4
  - CA Gap -1.1 0.4
  - o/w Relative policy gap -0.4
  - Elasticity -0.2
  - REER Gap (in percent) 5.4 -2.1
  - 1/ Based on the EBA-lite 3.0 methodology
  - 2/ Cyclically adjusted, including multilateral consistency adjustments.
- Assessment:
  - External position moderately weaker than implied by fundamentals and desirable policies.
  - EBA-lite CA model: cyclically adjusted CA estimated at 0.3   percent of GDP, below the CA norm of 1.4   percent of GDP for 2025, indicating a negative gap.
  - CA gap range between -1.1   and 0.4   percent of GDP across models.

### Real exchange rate (REER)
- Background:
  - REER volatile during 2024 after sharp prior adjustment; stabilized around mid-2024 and remained below historical average.
  - Early 2025: REER recorded modest appreciation reflecting partial NEER recovery and narrowing inflation differentials.
  - NEER trended downward through most of 2024, broadly stable since October 2024.
  - Limited exchange rate flexibility since late 2024 could mask latent imbalances given sensitivity to oil price volatility.
- Assessment:
  - EBA-lite CA model indicates a slight REER overvaluation of 5.4 percent.
  - REER model indicates a slight undervaluation of 2.1 percent.
  - Sustained exchange rate rigidity could constrain shock absorption; exchange rate policy should support external sustainability.

### Capital and financial accounts: flows and policy measures
- Background flows:
  - Financial account balance changed from $7.0 billion (net outflows) in 2024 to $1.7   billion in 2025.
  - Other investment balance dropped from $5.0 billion in 2024 to $1.9 b illion in 2025.
  - Direct investment balance changed from $1.1 billion in 2024 (net lending) to -$ 1.0 billion in the first three quarters of 2025 (net borrowing).
  - Portfolio flows were mainly driven by net incurrence of liabilities from the Eurobond issuance.
  - Reserve assets increased by $943 million in 2024 but contracted by about $1.3 billion in 2025.
- Assessment:
  - Shift from strong net lending to a more modest surplus in 2025 underscores higher pressures on external liquidity.
  - Need for close monitoring of external financing risks and prudent debt management.

### FX interventions and reserves level
- Background reserve levels:
  - Official reserve assets: $15.8 billion at end-2024; declined to $15.2   billion in 2025Q3; recovered to $15.9   billion by 2025Q4.
  - Reserve assets according to preliminary BOP data contracted by about $1.3 billion in 2025.
  - The kwanza remained broadly stable since October 2024 after earlier volatility; stability plus declines in reserves in early 2025 suggest possible FX interventions.
- Assessment:
  - Staff assesses Angola’s level of gross international reserves is approximately 102 percent of the ARA metric.
  - Reserves broadly adequate but vulnerability remains due to heavy reliance on oil exports.
  - Recommendation: build international reserves when feasible over the medium term, maintain exchange rate flexibility and robust liquidity buffers, and monitor financing conditions and reserve adequacy.

### Annex VII — Implementation of 2011 FSAP Recommendations and 2025 FSAP findings
- Context:
  - 2025 FSAP occurred amid ongoing economic recovery but noted lingering liquidity pressures and high sovereign debt distress risk.
  - Authorities report significant progress on legislative and regulatory reforms since 2011, but implementation remains at an early stage.
- Progress highlights:
  - Regulatory alignment and adoption of a risk-based approach progressed since 2021; expanded BNA supervisory powers; BNA formally designated as resolution authority; Council of Supervisors established.
  - Remaining needs: full implementation of risk-based approaches; close regulatory gaps in risk management; shift from compliance-based to more intrusive corporate governance supervision; address material data quality issues in prudential reports.
  - Financial safety net: resolution department established, crisis-simulation exercises conducted, MOUs with foreign counterparts concluded, DGF set up in 2019; but no interagency forum for crisis-management coordination and resolution tools/DGF not fully operational.
  - Strategic sovereign asset–liability management framework, including an oil stabilization fund, established under the Public Finance Sustainability Law.
  - Institutional reforms clarified macroprudential vs supervisory roles, but deficiencies remain in coordination, accountability, data collection, and calibration of macroprudential tools.
  - Financial sector development: Payment Systems Law (2020); instant payment system switch launched in 2023; first credit bureau started operations in 2021 (limited coverage); new Insurance and Reinsurance Law in 2022; laws on secured transactions and corporate restructuring and insolvency passed in 2021.

### Annex VII — Key FSAP recommendations (selected)
- Cross-cutting:
  - Strengthen reporting and validation of data, adopt and consistently use a single definition of NPLs.
  - Increase supervision staffing and establish formal planning for recruitment and training.
- Systemic and climate risk:
  - Improve monitoring of banks’ holdings of domestic and foreign government bonds from a market risk perspective.
  - Improve scenario-based solvency stress testing and implement cashflow-based liquidity stress testing.
  - Monitor funding concentration risks and conduct systemwide liquidity analysis.
  - Strengthen climate risk analysis capacity.
- Banking regulation and supervision:
  - Adjust SREP indicators and improve assessment of qualitative aspects; mandate meetings with senior bank management.
  - Enhance on-site supervision beyond credit risk; increase frequency and depth.
  - Reflect related-party regulation enhancements in supervisory practices.
  - Close gaps in corporate governance and risk management; introduce country and transfer risk regulation.
  - Adjust disclosure requirements to include main quantitative information quarterly and related parties/group structure information.
- Macroprudential framework and policies:
  - Prioritize development of macroprudential policy framework; improve institutional coordination, accountability, and capacity to assess impacts.
  - Strengthen toolkit to address sovereign risk concentration, FX mismatches, and household sector risks.
- Financial integrity:
  - Address AML/CFT deficiencies from the 2023 Mutual Evaluation Report, including full criminalization of money laundering; strengthen risk-based supervision; ensure timely, accurate, verified beneficial ownership information with proportionate sanctions; remedy gaps for targeted financial sanctions implementation.
- Financial safety net and crisis management:
  - Establish interagency forum and MOUs for crisis management; document policies for extraordinary government funding to the DGF and Resolution Fund.
  - Resolve or liquidate current problem banks.
  - Strengthen early intervention and entry in resolution with clear triggers.
  - Operationalize transfer and bridge bank tools and ensure DGF fully funded.
  - Ensure ELA accessibility to banks that may need resolution (insolvent but viable), subject to government guarantee if needed.

### Annex VIII — Capacity Development Strategy, 2026
- Overall approach:
  - Continue extensive CD from IMF and other institutions; sequence and prioritize reforms to improve absorption and implementation.
  - CD should align with policy priorities discussed in the 2026 Article IV consultation and support the National Development Plan (NDP) 2023–27.
- Key CD areas and actions:
  - Public Financial Management (PFM):
    - Address weaknesses in cash management, expenditure control, and financial reporting.
    - Build on Medium-Term Fiscal Framework (MTFF), fiscal risk analysis, and Medium-Term Expenditure Framework (MTEF).
    - 2024 TA on cash management provided recommendations; follow-up mission recommended.
    - 2019 PIMA follow-up needed to improve capital spending efficiency.
    - 2025 TA on fiscal risks strengthened identification and quantification of fiscal risks, notably from SOEs.
  - Fiscal policy and institutional reform:
    - IMF ICD provided TA on macro frameworks for Ministries of Planning and Finance.
    - Forthcoming mandated evaluation of the Fiscal Sustainability Law is a CD priority.
  - Public debt management:
    - AFS to support the debt unit with a diagnostic on local debt markets based on 2025 FSAP recommendations.
  - Tax policy and revenue administration:
    - FAD support on tax policy modernization, crisis management, project management, electronic access, and compliance risk management at AGT.
    - Review of new draft income tax law underway to ensure compliance with CD recommendations.
  - Monetary policy framework:
    - MCM and AFS TA to support transition to inflation-targeting, enhance forecasting and policy analysis, and strengthen monetary and FX operations frameworks.
  - Financial sector:
    - MCM TA on operationalizing bank recovery and resolution frameworks; follow-up TA in 2024.
    - Progress on STA recommendation to improve compilation of financial soundness indicators.
    - BNA prioritizes assistance on macroprudential oversight; participated in cyber risk supervision initiatives and received TA on risk-based supervision in 2025.
  - AML/CFT framework:
    - Coordinated CD essential following grey listing; LEG provided CD on legal framework for targeted financial sanctions and terrorist financing risks of non-profit organizations.
  - Climate change:
    - World Bank, AFD, EU, and AfDB provide CD and support; IMF C-PIMA under consideration.
  - Statistics:
    - Rebasing national accounts to 2019 is a key CD priority.
    - Broaden government financial statistics coverage to general government.
    - Address large errors and omissions in external sector statistics.

*Source: Excerpts from the provided IMF PDF content unit.*

### Annex IX. Data Issues

### Annex IX. Data Issues

### Data adequacy assessment — key findings
- Median Rating (heatmap codes): BABBBCB.
- Overall staff assessment: "The data provided to the Fund are adequate for surveillance." (classification present in source text.)
- Sectoral notes:
  - Macroeconomic data broadly available and sufficient for surveillance.
  - Government finance statistics: persistent issues with data quality and inter-source inconsistencies between publicly released data and data provided directly to staff.
  - External sector statistics: provision timely but with persistent large errors and omissions, "averaging 2 percent of GDP between 2020 and 2024."
  - Monetary and financial statistics: would benefit from improved granularity (e.g., decomposition of household loans); financial soundness indicators assessed separately in granularity matrix.
- Frequency and timeliness: generally, data are published on a timely basis; Public Debt Statistical Bulletin now released quarterly with a publication lag of approximately two months (improvement from prior intermittent publication).

### Changes since the last Article IV consultation
- National accounts:
  - Authorities published a historical series of national accounts data providing a comprehensive breakdown of GDP using both the production and expenditure approach, boosting data granularity.
  - Quarterly GDP data now fully published using the revised base year.
- Government finance:
  - October 2025: launch of government finance reports compliant with GFSM2014; transition from cash to accrual basis advanced.
  - New Statement of Government Operations: provides detailed breakdown of central government revenues (including different types of oil and tax revenues) and expenditures—improves granularity.
- Public debt statistics:
  - Public Debt Management Unit resumed publication of the quarterly Public Debt Statistical Bulletin including comprehensive data on public debt stocks and disbursements, SOE data, and arrears.
  - Debt bulletins now include a comprehensive breakdown of debt service (i.e., amortization, interest, and commissions) by type of debt and creditor type and an update of Angola's oil-collateralized debt stock.
  - Timeliness improved: bulletins released quarterly with a publication lag of approximately two months versus prior intermittent publication.

### Rationale for staff assessment and remaining shortcomings
- Positive factors supporting "broadly adequate" rating:
  - Shortcomings in other sectors are limited.
  - The central bank (BNA) and INE have improved extensiveness and transparency in statistical reporting.
  - Data are generally published in a timely manner.
- Remaining shortcomings that limit surveillance:
  - Government finance statistics: inconsistent reporting between public releases and data provided directly to staff hampers fiscal integration and analysis despite transition to GFSM2014.
  - External sector: errors and omissions averaging 2 percent of GDP (2020–2024) reduce certainty about Angola's reported external position.
  - Financial sector granularity: more detailed breakdowns (e.g., household loan composition) would enhance analysis of financial sector conditions.

### Corrective actions and capacity development priorities (staff recommendations)
- Complete a rebasing of the national accounts to 2019 to better reflect economic changes.
- Full adoption of GFSM2014 for government finance statistics.
- Address large errors and omissions in external sector statistics.
- Continue implementation of technical assistance recommendations by the IMF and the World Bank.

### Data standards participation and dissemination (high-level)
- Angola participates in the Enhanced General Data Dissemination System (e-GDDS) and publishes data on its National Summary Data Page since December 2018.
- The Table of Common Indicators Required for Surveillance (as of December 15, 2025) is maintained; frequency and timeliness codes used (D, W, M, Q, A, SA, I, NA, NLT) are noted in the source.

### Selected macroeconomic developments and near-term outlook (authorities’ statement)
- Growth:
  - Growth moderated to 3.1 percent in 2025 from 5.0 percent in 2024, largely reflecting lower oil production and softer oil prices.
  - Non-oil activity expanded by about 4.1 percent in 2025.
  - Growth projected to strengthen to around 4.1 percent in 2026, driven by continued non-oil momentum (projected at about 4.7 percent).
  - Medium-term growth expected to average around 4 percent during 2027–31, led by the non-oil sector.
- Inflation:
  - Annual inflation declined from 27.5 percent in December 2024 to 15.7 percent in December 2025.
  - Inflation eased further in early 2026, declining to 12.42 percent in March 2026 (from 23.85 percent in March 2025).
- Authorities’ policy emphasis:
  - Continued fiscal consolidation and prudent policies to safeguard debt sustainability while protecting priority social and development spending.
  - Implementation of the National Development Plan (NDP) 2023–27 to unlock non-oil potential, accelerate diversification, and foster more inclusive growth.
- Risks highlighted by authorities:
  - Heightened geopolitical tensions in the Middle East: higher oil prices could bolster fiscal revenues and external balances, while global energy and transport cost shocks could pass through to domestic prices and slow disinflation.

*Source: Annex IX. Data Issues, Afghanistan — Staff Report for the 2026 Article IV Consultation — Informational Annex (excerpts as provided).*

### 13.7 percent in 2026 and continue to converge toward the BNA’s medium-term

### 13.7 percent in 2026 and continue to converge toward the BNA’s medium-term objective of single-digit inflation.

### External sector
- Current account weakened further in 2025, reflecting a wider fiscal deficit and a softer private saving investment balance.
- Gross international reserves remained broadly stable, covering about 7½ months of imports at end-2025, and continue to provide an important buffer against external shocks.
- Angola successfully returned to international capital markets in October 2025 with a Eurobond issuance and tapped markets again in March 2026 through new Eurobond placements and liability-management operations, helping smooth the debt maturity profile and reduce near-term rollover risks.

### Fiscal policy and debt management
- Authorities committed to advancing fiscal consolidation to safeguard debt sustainability while protecting priority development and social spending.
- Fiscal pressures intensified in 2025 due to acute liquidity constraints and persistent weaknesses in cash and expenditure management.
- The 2026–31 Fiscal Strategy anchors policy on the non-oil primary balance (NOPB):
  - Projected NOPB deficit of 5.1 percent of GDP in 2026.
  - Fiscal anchor set on a credible downward trajectory below the 5 percent ceiling from 2027, converging to 2.5 percent of GDP by 2031, consistent with the Fiscal Sustainability Law.
- Consolidation approach: balanced mix of durable expenditure rationalization and revenue measures to strengthen public finances and reduce borrowing costs.
- Revenue-side priorities:
  - Strengthen non-oil revenue mobilization given structural challenges in oil production and oil-price volatility.
  - Improve tax administration, rationalize tax incentives, scale up digitalization to strengthen compliance, address tax arrears, and mobilize receivables from state-owned enterprises (SOEs).
- 2026 budget measures:
  - Planned reduction in primary expenditure of 2.9 percentage points of GDP relative to 2025.
  - Targeted rationalization including restraint in goods and services spending and continued implementation of fuel-subsidy reform.
  - Subsidy spending reduced from 14 percent in 2024 to a projected 9 percent in 2025; authorities intend to further contain subsidy costs with better targeting and strengthened social protection.
- Public financial management (PFM) reforms accelerated to strengthen cash management, expenditure controls, financial reporting, and fiscal-risk analysis, including SOE risks.
- Public Investment Management Assessment (PIMA) recommendations being advanced to improve project selection, raise spending efficiency, and ensure higher development returns.
- Debt management priorities:
  - Public debt declined from 59.9 percent of GDP in 2024 to 51.3 percent in 2025.
  - Authorities will prioritize concessional and low-cost financing, deepen the domestic government securities market, broaden the investor base, and extend maturities in line with the Medium-Term Debt Strategy.
  - Proactive liability management to mitigate refinancing and liquidity risks; any central bank financing will remain strictly within the legal framework.
  - Commitment to keeping the public debt ratio within the legal ceiling of 60 percent of GDP.

### Monetary and financial sector policies
- Focus on preserving price stability and strengthening policy credibility through a disciplined, data-driven monetary policy framework.
- By March 2026:
  - BNA’s policy rate stood at 17.5 percent.
  - Standing lending facility at 18.5 percent.
  - Standing deposit facility at 16.5 percent.
- Broad money (M2) expanded by 8.4 percent, consistent with the inflation objective.
- BNA stands ready to use liquidity management and other instruments as needed to preserve macroeconomic stability and keep inflation on a sustained downward path.
- Authorities welcome 2025 FSAP findings recognizing progress in regulation and supervision, formalizing BNA’s financial stability mandate, and enhancing oversight of non-bank financial institutions.
- Remaining vulnerabilities acknowledged: elevated NPLs, sovereign bank linkages, FX liquidity imbalances, and AML/CFT gaps.
- FSAP follow-up agenda advancing to strengthen macroprudential oversight, supervisory capacity and on-site inspections, data systems, and operational readiness of bank resolution.
- Commitment to full implementation of the FATF action plan to support a timely exit from the grey list and reinforce confidence in the financial system.
- Financial sector risks linked to financing conditions and banks’ significant holdings of government securities; gross financing needs and external debt service continue to weigh on policy space.
- Strengthened cash and debt management to contain liquidity pressures, mitigate refinancing risks, and preserve market confidence.
- Continued commitment to deepening the domestic debt market through more predictable issuance and a broader investor base.
- Continued fiscal consolidation and enhanced debt transparency are essential to further reduce vulnerabilities and support durable financial stability.

### Structural reforms and governance
- Promoting private sector-led, non-oil growth remains central to the authorities’ strategy.
- Reforms to strengthen competitiveness and diversification include streamlining business registration and licensing and improving access to finance for SMEs.
- Targeted initiatives in agriculture and agro-processing aim to support domestic value chains and reduce import dependence.
- Lobito Corridor highlighted as a flagship initiative with strong potential to improve connectivity, strengthen competitiveness, and support export diversification.
- Authorities committed to timely implementation of the NDP 2023–27 and are strengthening monitoring and evaluation frameworks, institutional coordination, and prioritization of high-impact projects.
- Governance and anti‑corruption reforms prioritized with emphasis on enforcement and accountability:
  - Strengthening transparency and control through comprehensive PFM reforms.
  - Active implementation of the National Anti‑Corruption Strategy, including codes of conduct.
  - Judicial and AML/CFT reforms to enhance investigative capacity, strengthen asset recovery frameworks, and establish a beneficial ownership registry.

### Conclusion
- Authorities remain firmly committed to preserving macroeconomic stability, strengthening fiscal governance, and fostering the conditions for inclusive and sustainable growth.
- Continued implementation of policies to reduce vulnerabilities, improve public sector efficiency, and advance structural and governance reforms to support Angola’s long-term development objectives.

*Source: IMF content unit provided.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1agoea2026001-source-pdf.pdf_