The International Monetary Fund (IMF) has warned that Angola must deepen its fiscal consolidation efforts and combat the budgetary slippages that have emerged since the end of the programme with the Fund in 2021.
“Budget consolidation efforts have waned and the buffers built up during the Extended Fund Facility from 2018 to 2021 are being eroded by budget slippages stemming from higher capital expenditure and slower reform of fuel subsidies,” reads the Fund’s analysis of Angola’s economy, released on Monday.
A return to a path of fiscal consolidation “is fundamental to strengthening fiscal buffers and creating space for development necessities”, which is why the Fund stresses “the importance of fully implementing fuel subsidy reforms, accompanied by mitigation measures aimed at protecting the most vulnerable and intensified efforts to mobilise non-oil revenues”.
In Article IV, the IMF directors welcomed last year’s economic recovery, but “emphasised the persistent risks of oil price volatility and debt vulnerabilities” and stressed “the urgent need to accelerate structural reforms to strengthen macroeconomic and financial stability and promote diversified and inclusive growth”.
In the annual analysis of all IMF member countries by the fund’s economists, they say that the kwanza fell by 10% last year against the US dollar and that “adverse market expectations and a high external debt service continue to weigh on the exchange rate”.
After an economic expansion of 3.8% last year, the IMF predicts that Angola will slow growth to 3%, driven mainly by the non-oil sector, and that inflation will fall to 21% on average this year.
Oil production is expected to improve slightly to 1.262 million barrels per day in 2024, from 1.266 million this year, but it is the price of oil that will hurt public finances the most, as the IMF predicts that the country will pocket US$31.5 billion (€30 billion) this year, down from US$35.4 billion (€33.7 billion) last year.
“High external debt servicing limits development spending and dependence on oil remains an obstacle to sustainable growth,” warn the IMF economists once again, adding that “liquidity risks could intensify if financing conditions deteriorate, further reducing social spending and putting pressure on the exchange rate”.
Lusa
