IMF Executive Board Approves US$3.7 Billion Extended Arrangement Under the Extended Fund Facility for Angola

IMF News, December 7, 2018

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Canonical URL: IMF Executive Board Approves US$3.7 Billion Extended Arrangement Under the Extended Fund Facility for Angola

On December 7, 2018, the Executive Board approved a three-year EAEFF in an amount of SDR 2.673 billion (about US$3.7 billion or 361 percent of Angola’s quota).
The Decision allows an amount of SDR715 million (about US$990.7 million) to be immediately made available to Angola.
The remaining amount will be phased in over the duration of the program, subject to semi-annual reviews.

Purpose: support Angola’s economic reform program to restore external and fiscal sustainability and lay foundations for sustainable, private-sector-led economic diversification.
Critical pillars of the program include:
- Fiscal consolidation to bring debt to safer levels.
- Increased exchange rate flexibility to regain competitiveness.
- Supportive monetary policy to reduce inflation.
- Strengthening the banking system.
- Enabling a better business environment.
- Updating the AML/CFT legal framework.
- Improving governance.

Fiscal consolidation is identified as a core element of the program.
Authorities’ planned measures include:
- Increase non-oil revenue, including by introducing a value added tax.
- Eliminate subsidies.
- Clear domestic arrears.
Protecting the poor and most vulnerable is emphasized; sequencing of reforms and putting in place off-setting measures will be important.
Strengthening public financial management is expected to improve allocation of scarce public resources and strengthen policy formulation and implementation.
Upfront fiscal consolidation in 2018 and gradual consolidation in the medium term is described as necessary to place public debt on a downward trajectory and create space for infrastructure and social spending.
Strengthened debt management and transparency is critical to address debt-related risks.
Sound policy implementation can mitigate risks from international oil prices.

Exchange rate depreciation and commitment to a market-determined exchange rate are described as critical steps toward eliminating foreign exchange shortages and restoring external competitiveness.
The liberalized exchange rate regime will be supported by tight monetary policy to anchor inflation expectations and allow accumulation of international reserves.

Safeguarding financial sector stability is identified as critical for the success of the program.
Authorities’ plans include:
- Improve governance and credit-risk management at public banks.
- Conduct an asset quality review for largest banks to inform possible recapitalization and restructuring needs.
- Reexamine policies that create foreign exchange mismatches in bank balance sheets to promote financial sector stability.
- Mitigate pressures on correspondent banking relationships by submitting a new AML/CFT law to Parliament.

Structural reforms under the program aim to diversify the economy to reduce fiscal risks and foster private sector development.
Planned structural measures include:
- Restructuring state-owned enterprises.
- Improving the business climate.
- Strengthening economic governance.
- Continuing to fight corruption.

Summarizes the Macroeconomic Stabilization Program focus: strengthening fiscal sustainability, reducing inflation, promoting a more flexible exchange rate regime and improving financial sector stability.
Notes implementation of a National Development Plan for 2018–22 to address structural bottlenecks and promote human development, public sector reform, diversification and inclusive growth.
Reiterates emphasis on governance improvements and anti-corruption efforts.
Highlights sequencing and offsetting measures to protect vulnerable populations and the role of strengthened fiscal and debt management.

IMF Communications Department — Press Release No. 18/463