IMF Concludes Mission on the 2014 Article IV Consultation with the Republic of Angola

LUANDA, Angola, July 16, 2014/African Press Organization (APO)/ — An International Monetary Fund (IMF) mission led by Ricardo Velloso, visited Luanda from July 1–14, 2014, to conduct discussions for the 2014 Article IV consultation.1

The mission met with Finance Minister Armando Manuel, Economy Minister Abrahão Gourgel, Commerce Minister Rosa Pacavira, Agriculture Minister Pedro Canga, Social Integration Minister João Baptista Kussumua, Construction Minister Waldemar Pires Alexandre, Petroleum Minister Botelho Vasconcelos, Central Bank Governor José Massano, as well as other senior officials of the executive branch. The mission also met with members of the Economic and Finance Commission of the National Assembly, and representatives from the financial sector, the non-financial private sector, and the state-owned oil company Sonangol, religious and non-governmental organizations, and the diplomatic community. At the conclusion of the mission, Mr. Velloso, the IMF Mission Chief for Angola, issued the following statement:

“The IMF staff mission held productive discussions with the Angolan authorities focusing on recent economic developments and the outlook for the economy in the near and medium term, as well as on the policies and structural reforms to maintain macroeconomic and financial stability, diversify the economy, promote inclusive growth, and alleviate poverty.

“Real Gross Domestic Product (GDP) growth in 2014 is projected to moderate to 3.9 percent as the expansion in agricultural output slows—from last year’s estimated high growth—and because of a temporary drop in oil production during the first half of the year. For 2015, real GDP growth is projected to accelerate to 5.9 percent as non-oil real GDP growth remains robust and oil production recovers. Annual inflation has continued to trend down faster than expected and fell below 7 percent in May-June 2014. Inflation by the end of 2014 is projected to rise to 7½ percent because of the one-off effect on prices of the new import tariff schedule, before continuing to trend down through 2015 and beyond. Central bank gross international reserves stood at the end of May 2014 at a comfortable US$ 31.2 billion.

“The fiscal expansion being implemented under the 2014 budget is taking place at a time of softening oil revenue that has led to a significant deterioration in the overall fiscal balance. A more cautious fiscal stance seems warranted to limit rising gross financing needs and save part of the oil wealth for future generations. Accommodating the authorities’ ambitious capital expenditure program will require a stronger domestic revenue effort, restraining the growth of current spending, and improving public investment efficiency.

“Maintaining fiscal and monetary policy buffers to protect against a downturn in oil revenue remains critical. In this context it will be important to develop an oil stabilization fund, with clear deposit and withdrawal rules, and improve coordination in the management of Angola’s public financial assets and liabilities.

“The authorities’ emphasis on addressing the country’s infrastructure deficit is well placed, but this should be completed by accelerating structural reforms to strengthen the business environment and facilitate growth. While the recent increase in import tariffs is expected to boost domestic production, it will be important to review periodically and withdraw this increased protection before vested interests become entrenched.

“Continued successful de-dollarization will depend on appropriate macroeconomic policies and market incentives. Key elements will be the expected further decline in inflation and increased use of the local market for government bonds to further develop kwanza denominated debt instruments.

“Angola has been strengthening financial sector governance, and it will be important to continue ongoing efforts to further strengthen bank supervision.

“The collection and dissemination of economic data and information is essential to business development and needs to be given high priority. Providing Instituto Nacional de Estatística (INE) with adequate resources and autonomy to carry out its mandate will be important.

“The IMF staff team thanks the Angolan authorities for their cooperation and for the arrangements made to facilitate the mission’s work in Luanda.”

The IMF Executive Board is expected to discuss the 2014 Article IV consultation in September 2014.

1 Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with its member countries, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.