Angola: Delays in State’s payments to suppliers could affect economic growth – World Bank

3 June 2009

Luanda, Angola, 3 June – Economic growth and employment in Angola may be affected by delays in payments to State suppliers, due to budget constraints caused by a fall in oil revenues, the World Bank warned Tuesday in Luanda.

Given the State’s financing difficulties, “there have been a lot of rumours of delays in payments to suppliers and a freeze in hires by the public sector,” an economic report published by the World Bank’s office in Luanda said.

“The delay in payment to suppliers can have a negative impact on growth as the suppliers, as a result, start making their own adjustments and cutting costs, especially be reducing employees,” it said.

The issue of delays in payment to suppliers was recently brought up by the President of the Portugal-Angola Chamber of Commerce and Industry (CCIPA), Carlos Bayan Ferreira, speaking to Portuguese newspaper Jornal de Negócios.

According to Bayan Ferreira, there are Portuguese companies that are approaching the chamber of commerce because “they are starting to feel the delays in payments from the Angolan authorities.”

The World Bank also describes the current difficulties the Angolan authorities are having in funding the current fiscal deficit.

The funding requires use of savings made over the last few years and contracting debt, which, on an external level” should under the current circumstances be limited to, “existing credit lines as international credit markets remain practically dry.”

Internally the national bank has been issuing bonds, but with “disappointing” results due to a lack of demand, even for new CPI securities, which are indexed to the rate of inflation and attractive returns.

In terms of oil revenues, since October 2008 the fall has been “dramatic” especially in the first two months of this year, when they were just 31 percent of those posted in the same period of the previous year.

The latest signs show some improvement – the price of a barrel of oil from the “Girassol” field saw a recovery of 25 percent in April against the beginning of the year and Angolan tax revenues, “should improve in the next few months.”

The World Bank also noted the fall in Angola’s foreign reserves – from US$20 billion in November 2008 to US$13.7 billion in March – due to a fall in revenues from the sale of oil and diamonds. (macauhub)