IMF Executive Board Completes Sixth Review of the Extended Fund Facility Arrangement for Angola and Concludes 2021 Article IV Consultation
IMF News, December 22, 2021
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- Published: December 22, 2021
Overview
- The Executive Board completed the sixth review of Angola’s program under an extended arrangement under the Extended Fund Facility (EFF) and concluded the 2021 Article IV consultation.
- The Board’s decision allows for an immediate disbursement of SDR 535.1 million (about $748 million).
- Total disbursements under the arrangement are SDR 3.2134 billion (about $4.5 billion).
- Waivers of nonobservance were approved for the performance criterion on net international reserves of the Banco Nacional de Angola.
Program background and objectives
- Angola’s three-year extended arrangement was approved on December 7, 2018, in the amount of SDR 2.673 billion (about $3.7 billion at the time of approval).
- The arrangement aims to:
- restore external and fiscal sustainability,
- improve governance,
- diversify the economy to promote sustainable, private sector-led economic growth.
- At the time of the third review, access was augmented by SDR 540 million (about $765 million at the time of approval) to support mitigation of COVID-19 impacts and sustain structural reforms.
Economic outlook and recent developments
- The impact of the COVID-19 pandemic on the Angolan economy has begun to abate amid higher oil prices and less disruptive containment measures.
- Non-oil growth has started to recover and is expected to contribute to a broad stabilization of overall output in 2021.
- Inflation has reached over 25 percent, driven by supply-side factors.
- Continued fiscal restraint should deliver a substantial overall surplus in 2021, while higher oil prices are supporting a high current account surplus.
- Angola’s overall growth is projected to turn positive in 2022 and reach around 4 percent in the medium term, bolstered by planned growth-enhancing structural reforms.
- Inflation is expected to gradually ease starting in 2022 as global food inflation moderates and the central bank maintains a tight policy stance.
- A continued prudent fiscal stance, embedded in the 2022 budget plans, will support a rapid decline in the public debt-to-GDP ratio while protecting key health and social spending.
Policy assessment and recommendations (from Ms. Antoinette Sayeh)
- Fiscal policy
- The authorities’ disciplined fiscal policy is helping deliver a sharp drop in the public debt-to-GDP ratio in 2021, strengthening debt sustainability while protecting social spending amid the pandemic.
- The 2022 budget aims to consolidate the fiscal retrenchment.
- Sustaining the reduction in public debt towards the authorities’ medium-term target will require continued fiscal discipline supported by structural fiscal reforms.
- Fiscal policy should mitigate the impact of oil-price shocks by saving future windfalls from high oil prices and protecting priority spending in downturns.
- Monetary policy and exchange rate
- The National Bank of Angola (BNA) has appropriately tightened the monetary policy stance to address persistently high inflation, which stems mostly from supply-side factors.
- With an increase in the policy rate and restrained money growth, this stance is expected to begin bringing down inflation next year.
- The central bank needs to stand ready to further tighten monetary policy should inflation accelerate again, or expectations of high inflation become entrenched.
- The BNA’s plans to transition toward an inflation-targeting monetary policy framework and commitment to a flexible exchange rate regime are welcome.
- Financial sector
- Authorities need to continue efforts to ensure the health of the sector, building on substantial progress in financial sector reforms.
- Since the start of the program, the sector’s capitalization and the legal framework for regulation and supervision have been reinforced.
- Priorities include completing modernization of the regulatory framework and the restructuring and recapitalization of the two largest troubled public banks.
- Implementation of plans to address the still high level of non-performing loans is important.
- Structural reforms and diversification
- Diversifying the economy through continued deep structural reforms is essential for achieving inclusive growth and consolidating economic sustainability.
- Rapid expansion of non-oil output requires implementation of ongoing reforms to strengthen governance, improve the business environment, promote private investment and trade openness, and develop human capital and infrastructure.
- Authorities should promote conditions for faster development of key sectors such as agriculture, telecommunications, and finance.
Key economic indicators (Selected Economic Indicators, 2020-22)
- Real gross domestic product (percent change)
- 2020 Actual: -5.2
- 2021 Proj: 0.1
- 2022 Proj.: 2.9
- Oil sector (percent change)
- 2020 Actual: -8.0
- 2021 Proj: -10.6
- 2022 Proj.: 1.6
- Non-oil sector (percent change)
- 2020 Actual: -4.0
- 2021 Proj: 3.9
- 2022 Proj.: 3.4
- Nominal gross domestic product (GDP)
- 2020 Actual: 9.7
- 2021 Proj: 39.1
- 2022 Proj.: 23.0
- GDP deflator
- 2020 Actual: 15.8
- 2021 Proj: 39.0
- 2022 Proj.: 19.5
- Non-oil GDP deflator
- 2020 Actual: 22.3
- 2021 Proj: 25.7
- 2022 Proj.: 22.2
- Consumer prices (annual average)
- 2020 Actual: 25.1
- 2021 Proj: 26.8
- 2022 Proj.: 18.0
- Gross domestic product (billions of kwanzas)
- 2020 Actual: 33,832
- 2021 Proj: 47,071
- 2022 Proj.: 57,892
- Oil gross domestic product (billions of kwanzas)
- 2020 Actual: 8,815
- 2021 Proj: 14,391
- 2022 Proj.: 16,592
- Non-oil gross domestic product (billions of kwanzas)
- 2020 Actual: 25,017
- 2021 Proj: 32,680
- 2022 Proj.: 41,299
- Gross domestic product (billions of U.S. dollars)
- 2020 Actual: 58.5
- 2021 Proj: 73.7
- 2022 Proj.: 89.0
- Gross domestic product per capita (U.S. dollars)
- 2020 Actual: 1,885
- 2021 Proj: 2,307
- 2022 Proj.: 2,704
- Central government (percent of GDP)
- Total revenue
- 2020 Actual: 20.8
- 2021 Proj: 22.1
- 2022 Proj.: 21.6
- Of which: Oil-related
- 2020 Actual: 10.7
- 2021 Proj: 12.8
- 2022 Proj.: 12.7
- Of which: Non-oil tax
- 2020 Actual: 8.8
- 2021 Proj: 8.2
- 2022 Proj.: 7.8
- Total expenditure
- 2020 Actual: 22.7
- 2021 Proj: 19.3
- 2022 Proj.: 19.1
- Current expenditure
- 2020 Actual: 17.5
- 2021 Proj: 15.6
- 2022 Proj.: —
- Capital spending
- 2020 Actual: 5.2
- 2021 Proj: 3.7
- 2022 Proj.: 3.3
- Overall fiscal balance
- 2020 Actual: -1.9
- 2021 Proj: 2.8
- 2022 Proj.: 2.4
- Non-oil primary fiscal balance
- 2020 Actual: -5.5
- 2021 Proj: -4.4
- 2022 Proj.: -?
- Non-oil primary fiscal balance (percent of non-oil GDP)
- 2020 Actual: -7.5
- 2021 Proj: -6.3
- 2022 Proj.: -7.3
- Money and credit (end of period, percent change)
- Broad money (M2)
- 2020 Actual: 24.3
- 2021 Proj: 3.0
- 2022 Proj.: 12.0
- Percent of GDP (M2)
- 2020 Actual: 37.5
- 2021 Proj: 27.8
- 2022 Proj.: 25.3
- Velocity (GDP/M2)
- 2020 Actual: 2.7
- 2021 Proj: 3.6
- 2022 Proj.: 4.0
- Velocity (non-oil GDP/M2)
- 2020 Actual: 2.0
- 2021 Proj: 2.5
- Credit to the private sector (annual percent change)
- 2020 Actual: -7.7
- 2021 Proj: 13.0
- 2022 Proj.: 12.5
- Balance of payments
- Trade balance (percent of GDP)
- 2020 Actual: 27.5
- 2021 Proj: 25.0
- 2022 Proj.: —
- Exports of goods, f.o.b. (percent of GDP)
- 2020 Actual: 35.8
- 2021 Proj: 43.5
- 2022 Proj.: 40.8
- Of which: Oil and gas exports (percent of GDP)
- 2020 Actual: 33.5
- 2021 Proj: 40.9
- 2022 Proj.: 38.3
- Imports of goods, f.o.b. (percent of GDP)
- 2020 Actual: 16.3
- 2021 Proj: 15.9
- 2022 Proj.: —
- Terms of trade (percent change)
- 2020 Actual: -36.6
- 2021 Proj: 51.2
- 2022 Proj.: 5.4
- Current account balance (percent of GDP)
- 2020 Actual: 1.5
- 2021 Proj: 10.8
- 2022 Proj.: 9.5
- Gross international reserves (end of period, millions of U.S. dollars)
- 2020 Actual: 10,978
- 2021 Proj: 14,056
- 2022 Proj.: 14,756
- Gross international reserves (months of next year's imports)
- 2020 Actual: 7.4
- 2021 Proj: 8.1
- 2022 Proj.: —
- Net international reserves (end of period, millions of U.S. dollars)
- 2020 Actual: 8,379
- 2021 Proj: 9,440
- 2022 Proj.: 10,140
- Exchange rate
- Official exchange rate (average, kwanzas per U.S. dollar)
- 2020 Actual: 578
- 2021 Proj: ..
- Official exchange rate (end of period, kwanzas per U.S. dollar)
- 2020 Actual: 656
- Public debt (percent of GDP)
- Public sector debt (gross)1
- 2020 Actual: 135.1
- 2021 Proj: 95.9
- 2022 Proj.: 78.9
- Of which: Central Government debt
- 2020 Actual: 125.3
- 2021 Proj: 89.5
- 2022 Proj.: 72.9
- Oil
- Oil and gas production (millions of barrels per day)
- 2020 Actual: 1.388
- 2021 Proj: 1.258
- 2022 Proj.: 1.282
- Oil and gas exports (billions of U.S. dollars)
- 2020 Actual: 19.6
- 2021 Proj: 30.1
- 2022 Proj.: 34.1
- Angola oil price (average, U.S. dollars per barrel)
- 2020 Actual: 41.3
- 2021 Proj: 68.3
- 2022 Proj.: 76.0
- Brent oil price (average, U.S. dollars per barrel)
- 2020 Actual: 42.3
- 2021 Proj: 70.2
- 2022 Proj.: 77.8
Sources: Angolan authorities; and IMF staff estimates and projections.