Angola will have to diversify its economy to offset falling oil prices

12 February 2015

The recent decline in oil prices will force Angola to accelerate the diversification of its economy, as the drop in prices would appear to be a structural change in the medium term, the World Bank said in recent document.

“The new context makes the medium-term objective of the Angolan authorities to diversify the economy beyond oil more important,” according to the document, a brief report outlining the reasons for granting a US$500 million loan to Luanda, following a drop in tax revenue due to the decline in the price of oil, the main source of Angolan state revenue.

In the document cited by Portuguese news agency Lusa, the World Bank analysts said that “Angola needs a countercyclical fiscal policy in order to maintain the diversification efforts of the economy while protecting the most vulnerable in the new context of the oil sector, marked by lower prices and a shock in supply and to a lesser extent, also in demand. ”

The loan from the World Bank to Angola has a “spread” of between 0.26 percent and 0.46 percent over Libor, a term of 30 years, with various repayment profiles and a built-in option to help recipients manage the interest rates and currency risks.

The US$500 million is in addition to two others of US$250 million each, contracted with Goldman Sachs and Gemcorp Capital, meaning that this year alone, Angola has already contracted loans worth US$1 billion, along with a set of public debt issues on international markets, a process that will be led by Goldman Sachs. (macauhub/AO)