IMF Executive Board Concludes 2022 Article IV Consultation with Angola
February 23, 2023
Washington, DC : The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with Angola.
Angola’s economy continued to recover from the COVID-19 pandemic in 2022, supported by higher oil prices, improved oil production, and resilient non-oil activity. Non-oil growth was broad-based despite a challenging external environment. Growth is estimated at 3.5 percent for 2023. Headline inflation declined significantly to 13.8 percent y/y at end-December 2022, driven by lower global food prices, a stronger kwanza, and previous efforts by the central bank to tighten monetary policy.
The non-oil primary deficit increased in 2022 following higher-than-budgeted capital expenditure and higher-than-expected fuel subsidy costs. Nonetheless, the public debt-to-GDP ratio fell by an estimated 17.5 percentage points of GDP to an estimated 66.1 percent of GDP, aided by a stronger exchange rate. The current account is estimated to have remained in a large surplus in 2022, while foreign currency reserve coverage remained adequate.
Overall growth is expected to continue in 2023 and reach about 4 percent in the medium term, as the authorities’ structural reform agenda supports the non-oil sector. Inflation should continue its gradually declining path, reaching single digits in 2024. The 2023 budget envisions a resumption of fiscal adjustment, which is necessary to approach the authorities’ twin medium-term fiscal and debt targets and guard against debt vulnerabilities. Downside risks to the near-term outlook include a larger-than-expected decline in global oil prices and renewed global food price pressures, as well as adverse weather conditions that impact the agriculture sector.
Executive Board Assessment [2]
Executive Directors agreed with the thrust of the staff appraisal. They commended the Angolan authorities’ sound policies and commitment to reforms following the conclusion of the Fund supported program and welcomed the economic recovery in 2022. Given continued vulnerabilities and elevated global uncertainty, Directors encouraged the authorities to maintain the reform momentum and diversify the economy to safeguard the hard won macroeconomic stability and to ensure an inclusive and sustainable growth.
Directors welcomed the authorities’ commitment to their medium term fiscal and debt targets and called for ambitious, growth friendly adjustments to achieve those targets. In that context, they recommended further mobilization of non-oil revenue, strengthening revenue administration and public financial management, and reforming state owned enterprises. Such efforts, together with spending rationalization, would create the necessary fiscal space for public investment and targeted social spending. Directors also welcomed the authorities’ commitment to fuel subsidy reforms when conditions allow, and encouraged faster implementation of the cash transfer program. Continued sound debt management is also crucial.
Directors commended the Banco Nacional de Angola’s (BNA) decisive actions that resulted in a large disinflation in 2022. Noting that inflation remains elevated and risks to price stability persist, Directors recommended a wait and see approach to monetary policy actions to support the disinflationary path. Directors also supported the BNA’s efforts to strengthen its policy effectiveness, including by aligning the interbank rate with the policy rate and transitioning toward an inflation targeting framework. They also welcomed the authorities’ commitment to exchange rate flexibility and their plan to eliminate the remaining exchange restrictions.
Directors encouraged the authorities to continue their efforts to strengthen financial stability, building on strong previous progress. They noted, in particular, the need to implement the remaining secondary legislation needed to fully implement the Financial Institutions Law, including for bank recovery and resolution planning. Directors also emphasized the importance of adopting a more comprehensive approach to dealing with problem banks. Efforts to address nonperforming loans should continue.
Directors highlighted the need to continue the strong reform momentum, since structural reforms would be essential to diversify Angola’s economy and achieve inclusive and sustainable growth. They emphasized the need to bolster human and physical capital and access to private credit. Directors also noted the need to make further progress on strengthening governance, transparency, and the AML/CFT regime, to improve the business environment and promote private investment. In this context, they encouraged publication of the audited COVID expenditure reports. Completing the anti-corruption strategy is also important. Directors also commended the authorities’ focus on building climate resilience and on fostering gender equality.
It is expected that the next Article IV consultation with Angola will be held on the standard 12-month cycle.
[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, 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.
[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm .
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Angola: Selected Economic Indicators |
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