Africa > Angola

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International Monetary Fund. African Dept.
While improving, the economic outlook remains highly challenging, given the slow and uncertain recovery from the COVID-related shocks. Heavily dependent on oil, the Angolan economy has suffered from weakness in that sector, with falling production (related to the pandemic) and only a partial rebound in international prices recently. These shocks have led to a fifth straight year of recession and hardship. The public debt-to-GDP ratio has risen to very elevated levels, driven by recent real exchange rate depreciation. Nevertheless, strong fiscal performance and active debt management are setting the stage for a gradual economic recovery and reduction in debt vulnerabilities.
Irina Bunda, Luc Eyraud, and Zhangrui Wang
The coronavirus (COVID-19) crisis, which has hit financial systems across Africa, is likely to deteriorate banks’ balance sheets. The largest threat to banks pertains to their loan portfolios, since many borrowers have faced a sharp collapse in their income, and therefore have difficulty repaying their obligations as they come due. This could lead to a sharp increase in nonperforming loans (NPLs) in the short to medium term.
Mr. Ali J Al-Sadiq and Ms. Inci Ötker
Declining commodity prices during mid-2014-2016 posed significant challenges to commodity-exporting economies. The severe terms of trade shock associated with a sharp fall in world commodity prices have raised anew questions about the viability of pegged exchange rate regimes. More recently, the COVID-19 pandemic and the measures needed to contain its spread have been associated with a significant disruption in several economic sectors, in particular, travel, tourism, and hospitality industry, adding to the downward pressure on commodity prices, a sharp fall in foreign exchange earnings, and depressed economic activity in most commodity exporters. This paper reviews country experiences with different exchange rate regimes in coping with commodity price shocks and explores the role of flexible exchange rates as a shock absorber, analyzing the macroeconomic impact of adverse term-of-trade shocks under different regimes using event study and panel vector autoregression techniques. It also analyzes, conceptually and empirically, policy and technical considerations in making exchange rate regime choices and discusses the supporting policies that should accompany a given regime choice to make that choice sustainable. It offers lessons that could be helpful to the Caribbean commodity-exporters.
International Monetary Fund. African Dept.
While improving, the economic outlook remains highly challenging, given the slow and uncertain recovery from the COVID-related shocks. Heavily dependent on oil, the Angolan economy has suffered from weakness in that sector, with falling production (related to the pandemic) and only a partial rebound in international prices recently. These shocks have led to a fifth straight year of recession and hardship. The public debt-to-GDP ratio has risen to very elevated levels, driven by recent real exchange rate depreciation. Nevertheless, strong fiscal performance and active debt management are setting the stage for a gradual economic recovery and reduction in debt vulnerabilities.
International Monetary Fund. African Dept.
The economic outlook has substantially deteriorated since the Second Review, driven by the negative effects of the COVID-19 pandemic on global economic activity and oil prices. The adverse impact of the shock on the Angolan economy, which is highly dependent on oil (95 percent of exports, two-thirds of government revenue), adds to the hardship from five consecutive years of recession. Rapid exchange rate depreciation and the decline in oil prices have pushed the public debt-to-GDP ratio to a very high level. However, continued fiscal retrenchment, prudent debt management, and debt reprofiling are expected to improve debt dynamics progressively.
International Monetary Fund. African Dept.
The economic outlook has substantially deteriorated since the Second Review, driven by the negative effects of the COVID-19 pandemic on global economic activity and oil prices. The adverse impact of the shock on the Angolan economy, which is highly dependent on oil (95 percent of exports, two-thirds of government revenue), adds to the hardship from five consecutive years of recession. Rapid exchange rate depreciation and the decline in oil prices have pushed the public debt-to-GDP ratio to a very high level. However, continued fiscal retrenchment, prudent debt management, and debt reprofiling are expected to improve debt dynamics progressively.
International Monetary Fund. African Dept.
The economic outlook has deteriorated since the First Review. Real GDP is expected to contract in 2019, driven by lower-than-expected oil production. Disinflation is expected to halt, inter alia because of increases in regulated prices. Beyond 2019, lower oil prices and slower recovery in oil production are expected to weigh on oil exports and put pressure on the external current account and international reserves. While the rapid depreciation of the exchange rate has led to a sizable increase in the debt-to-GDP ratio, the ongoing fiscal retrenchment will help shield public expenditure from oil-price volatility and reverse the public debt trend.
International Monetary Fund. African Dept.
This paper discusses Angola’s Second Review of the Extended Arrangement Under the Extended Fund Facility, Requests for a Waiver of NonObservance of Performance Criteria, Modifications of Performance Criteria, and Financing Assurances Review. Angola continues to face a deteriorated external environment, which is weighing on the economic outlook. The Angolan authorities have maintained their commitment to the Fund-supported program despite a challenging external and domestic environment. The authorities’ commitment to fiscal consolidation has been illustrated by the outperformance of the end-June 2019 non-oil primary fiscal deficit target by a wide margin. Sustained fiscal discipline is needed to address debt vulnerabilities. The conservative fiscal stance is expected to continue in 2020. In order to ensure that gains from fiscal consolidation will be preserved in the medium term and to mitigate the elevated risks to debt sustainability, the authorities need to persevere with measures to mobilize non-oil revenue, strengthen public financial management, improve debt management, and bolster transparency and accountability of state-owned enterprises.
International Monetary Fund. African Dept.
A 36-month Extended Arrangement under the Extended Fund Facility (hereafter the “arrangement”) was approved last December, with access of SDR 2,673 million (361 percent of quota). Lower international oil prices would reduce oil revenues, widen the current account deficit, and stymie growth recovery. The authorities are implementing a proper policy response to the weakened outlook, through a conservative supplementary budget for 2019, alternative sources of cheaper financing, and progress toward a more flexible exchange rate regime.