IMF Executive Board Completes the Second Review Under Angola’s Extended Arrangement and Approves US$247 Million Disbursement
IMF News, December 5, 2019
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- Published: December 5, 2019
Review outcome and disbursement
- On December 5, 2019, the Executive Board completed the Second Review of Angola’s economic program under an extended arrangement under the Extended Fund Facility (EFF).
- Completion of the review unlocks access to SDR 179 million (about US$247 million).
- Total disbursements under the extended arrangement are SDR 1.073 billion (about US$1.48 billion).
Program adjustments, waivers, and targets
- The Executive Board approved:
- waivers of nonobservance and modification of the performance criteria (PC) on net international reserves and non-accumulation of external debt arrears;
- introduction of a new PC on reserve money (ceiling);
- modifications to three indicative targets: increasing the ceilings on the accumulation of payments arrears and on public debt; and a new indicative ceiling on the issuance of debt guarantees by the Central Government;
- changes in the timetable of six structural benchmarks (SBs);
- five new SBs to underpin fiscal consolidation and transparency, and support financial sector restructuring.
Program background and objectives
- Angola’s three-year extended arrangement was approved by the IMF Executive Board on December 7, 2018, in the amount of SDR 2.673 billion (about US$3.7 billion at the time of approval), the equivalent of 361 percent of Angola’s quota.
- Program aims:
- restore external and fiscal sustainability;
- improve governance;
- diversify the economy to promote sustainable, private sector-led economic growth.
Key findings and assessments (Statement by Mr. Tao Zhang, Deputy Managing Director and Acting Chair)
- The Angolan authorities have maintained their commitment to the Fund-supported program despite a challenging external and domestic environment.
- The authorities’ commitment to fiscal consolidation was illustrated by the outperformance of the end-June 2019 non-oil primary fiscal deficit target by a wide margin.
- Angola continues to face a deteriorated external environment, which is weighing on the economic outlook.
Policy recommendations and required actions (from Mr. Tao Zhang)
- Fiscal policy and debt:
- Sustain fiscal discipline to address debt vulnerabilities.
- Continue the conservative fiscal stance expected to continue in 2020.
- Persevere with measures to mobilize non-oil revenue, strengthen public financial management, improve debt management, and bolster transparency and accountability of state-owned enterprises to preserve medium-term gains and mitigate elevated risks to debt sustainability.
- Monetary and exchange rate policy:
- The National Bank of Angola (BNA) took steps to eliminate remaining imbalances in the foreign exchange market and reduced constraints to market-price formation in foreign exchange auctions.
- The monetary stance has been recalibrated to address excessive depreciation pressures on the kwanza.
- The BNA should maintain its tight monetary policy stance, and stand ready to tighten further if warranted, in order to support the disinflation process.
- Financial sector:
- Full and timely implementation of banking sector recapitalization and restructuring is essential to address financial sector risks.
- Asset quality reviews of 13 banks will inform possible recapitalization needs of private banks and of public banks, consistent with available fiscal space.
- Further amendments are warranted to the BNA and Financial Institutions Laws to enable the authorities to strengthen bank supervision and resolution.
- Structural reforms:
- Continued implementation of structural reforms is critical to diversifying the economy and laying the foundations for sustainable, private sector-led economic growth.
- The Government remains committed to improving the investment environment, strengthening governance, and fighting corruption, including by enhancing AML/CFT legislation.
Source: IMF Press Release No. 19/443 — “IMF Executive Board Completes the Second Review Under Angola’s Extended Arrangement and Approves US$247 Million Disbursement”, December 5, 2019.