Angola should reduce its budget deficit, IMF says

8 February 2017

The government of Angola should reduce the budget deficit in 2017 to 2.25% of gross domestic product (GDP) and seek a primary non-oil budget surplus of 1% of GDP, according to a report issued on Monday in Washington by the International Monetary Fund (IMF).

Drawn up under Article IV, which annually examines the economies of members of the Fund, the document said that Angola should “promote economic diversification by improving the business climate and strengthening the role of the private sector in the reconstruction of infrastructure.”

Diversification of the economy, which is seen as “the main economic challenge,” is another of the recommendations from IMF experts, which analysed the Angolan economy at the end of 2016 and the findings have now been published.

“The shock of oil prices that began in mid-2014 significantly reduced tax revenues and exports, with stagnant growth and a sharp rise in inflation, which has highlighted the need to respond more forcefully to vulnerabilities and the dependence on oil and to diversify the economy,” said the analysts from the IMF’s African department.

The authorities have taken steps to mitigate the impact of the external shock, say the experts, stressing the “improvement of 18% of GDP in the primary non-oil fiscal balance in 2015/2016, mainly achieved through the implementation of spending cuts, including eliminating fuel subsidies.”

However, they add, “the exchange rate was set again in April 2016, which led to an appreciation of the kwanza in real terms, requiring additional policies to further adjust the economy to the ‘new normal’ in the oil market and to return growth to a level consistent with poverty reduction.” (macauhub)