The Executive Board of the International Monetary Fund (IMF) yesterday completed the fifth review of Angola’s economic program supported by an extended arrangement under the Extended Fund Facility (EFF).
The Board’s decision allows for an immediate disbursement of SDR 535.1 million – about US$772M, bringing total disbursements under the arrangement to SDR 2,678.3 billion (about US$3.9B).
Angola’s three-year extended arrangement was approved by the Executive Board on December 7, 2018 , in the amount of SDR 2.673 billion (about US$3.7B at the time of approval). It aims to restore external and fiscal sustainability, improve governance, and diversify the economy to promote sustainable, private sector-led economic growth. At the time of the third review, the Executive Board also approved the authorities’ request for an augmentation of access of SDR 540 million (about US$765M at the time of approval) to support the authorities’ efforts to mitigate the impact of COVID-19 and sustain structural reform implementation.
Angola is transitioning to a gradual recovery from the COVID-19 shock amid higher global oil prices, low levels of reported COVID-19 infections and the start of a vaccination campaign. The effects of the pandemic continue to be felt across the economy and society, however. The authorities have supported the recovery through sound policies that aim to further stabilize the economy, create opportunities for inclusive growth and protect the most vulnerable in Angolan society. The ongoing fiscal adjustment, in the face of the pandemic’s impact, is reinforcing debt sustainability, while allowing for increased health and social spending. The authorities have also tilted their monetary policy stance towards tightening, considering persistently high inflation.
In completing the review, the Executive Board also approved the authorities’ request for a waiver for the nonobservance of the continuous performance criterion on non-accumulation of external debt payment arrears by the Central Government and the Banco Nacional de Angola.
The Executive Board also approved today the authorities’ request for modification of some performance criteria, indicative targets, and structural benchmarks.
Following the Executive Board’s discussion on Angola, Ms. Antoinette Sayeh, Deputy Managing Director and Acting Chair, issued the following statement:
“The Angolan authorities’ strong commitment to sound policies under the IMF-supported arrangement has enabled Angola to mitigate the worst effects of the pandemic. Aided by higher oil prices, the authorities are supporting Angola’s recovery by consolidating macroeconomic stability while protecting the most vulnerable.
“The authorities are continuing to strengthen public finances and debt dynamics. They achieved a strong fiscal adjustment in 2020 and are on track to do the same in 2021, while increasing health and social spending. By saving the bulk of oil revenue windfall this year, they are helping to sustain the planned rapid reduction in public debt vulnerabilities. Their decision to request an extension of debt service relief under the Debt Service Suspension Initiative (DSSI) through end-December 2021 is welcome.
“The National Bank of Angola (BNA) has appropriately shifted its policy stance toward tightening given continued inflationary pressures. The recent policy adjustments to contain money supply are welcome, and the BNA should move quickly to tighten further if inflation does not begin to decelerate significantly. The authorities have appropriately relied on exchange rate flexibility as a shock absorber.
“The enactment of the Financial Institutions Law (FIL) will empower the authorities to safeguard financial stability and proceed swiftly with the pending restructuring of a troubled public bank. Expeditious implementation of the FIL’s secondary legislation is crucial. It is also vital to strengthen BNA independence and governance via the proposed central bank law, including the consideration of constitutional amendments.
“Strong non-oil growth recovery is critical for sustainability. The authorities need to maintain momentum on structural reforms that support stronger diversified growth, enhance governance, and combat corruption.”