Press Release No. 11/256

Press Release: Statement at the Conclusion of the IMF Mission and SBA Fifth Review Discussions with Angola

June 27, 2011

A staff team from the International Monetary Fund (IMF), led by Mr. Mauro Mecagni, visited Luanda from May 25 to June 8, 2011, to conduct the fifth review under Angola’s 27 month Stand-By Arrangement (SBA) with the IMF. The SBA approved in November 2009 provides financing of SDR 859 million, or about US$1.4 billion, of which US$1.25 billion has been disbursed to date. During its stay, the mission met with Planning Minister Ana Dias Lourenço, Finance Minister Carlos Alberto Lopes, Economy Minister Abrahão Pio dos Santos Gourgel, Central Bank Governor José de Lima Massano, other senior government officials, members of the National Assembly, and representatives of the banking, business, diplomatic, and academic communities. The discussions continued after the end of the mission.

At the end of the discussions, Mr. Mecagni issued the following statement:

“The IMF staff team held productive discussions with the Angolan authorities, focused on the performance under the SBA until end-March 2011, the near-term economic outlook, and the related policy challenges. The mission and the Angolan authorities have reached a staff-level agreement on the completion of the fifth review under the SBA. The agreement is subject to approval by IMF Management and the Executive Board. Board consideration is expected in September 2011. Completion of the review will enable Angola to withdraw SDR 85.9 million (about US$136 million).

“Angola’s economy continues to recover from the 2009 fiscal and balance of payments crises. Real GDP growth was affected by oil production difficulties, but rising oil prices in combination with a reduction in imports resulted in a sharp improvement in the external current account, to a surplus of 9 percent of GDP. A large increase in external reserves reached the equivalent of about 5 months of imports at end-2010. A prudent implementation of fiscal policies helped swing the overall fiscal balance into a surplus of about 8 percent of GDP, associated with a sizeable improvement of the non-oil primary deficit. Inflation remained stable at a rate of about 15 percent.

“Performance under the SBA through end-March 2011 saw considerable progress in the implementation of the government stabilization and reform agenda. In particular significant progress has been made in settling the stock of domestic arrears incurred during 2008-09, although this exercise, initially planned to be finalized by end-March 2011, has been subject to some delays due to the protracted process of verification of related claims. The verified payments’ arrears have been largely cleared, and settlement agreements with the remaining suppliers are expected to be completed in June. While government controls over expenditure commitments have been intensified to avoid the emergence of new arrears, further improvements are needed to resolve this issue completely. The authorities are committed to settle in the near future the accounts payable accumulated in the fourth quarter of 2010, and, going forward, to manage payments so as to keep accounts payable below the program limit of Kz 100 billion.

“Macroeconomic prospects for 2011 are positive, reflecting higher oil prices and projected oil production of around 1.7 million barrels per day. The projected oil revenues will allow the government’s plan for a supplementary budget to be accommodated within the macroeconomic program. This supplementary budget is consistent with the need to address infrastructure bottlenecks and social development priorities. However, as the global environment remains unusually uncertain the authorities are also committed to further strengthen foreign reserves as a buffer against oil revenue volatility, a key program objective. Further reduction of inflation remains a policy priority.

“The government’s reform agenda for 2010 and beyond appropriately focuses on administrative reforms to strengthen public financial management; comprehensive tax reforms; sustained improvement in the business environment required to support diversification of the economy; and increasing transparency and accountability of public entities’ operations.”