International aid supports recovery of the Angolan economy

13 November 2017

Angola is receiving support from the International Monetary Fund (IMF) to normalise access by its banks to international money markets, a first step, according to analysts, towards a more comprehensive assistance agreement.

The Angolan Minister of Finance, Archer Mangueira, confirmed in a recent interview that the government was assessing a new IMF programme, adding that it had yet to be decided if it would include financing.

The aim, according to the minister of the new government of João Lourenço, is to support macro-economic improvement, budgetary consolidation, monetary and exchange rate adjustment and the promotion of investments.

With the negotiations in an initial phase, the Economist Intelligence Unit (EIU) said that “a deeper involvement (of the IMF) through a formal programme would be positive for the country,” and that its forecasts for the Angolan economy will reflect a greater likelihood of reform, if there is an agreement for assistance, with or without funding.

The issue, it said, is the willingness of the authorities to “adopt the harsh reforms – and transparency,” that would result from an agreement, said the EIU in its October report on Angola.

In April 2016 the government made  a formal request for assistance from the IMF, but three months later abandoned the negotiations for an extended fund facility (EFF), a three-year programme which would allow access to a maximum of US$4.5 billion.

The head of the IMF mission to Angola, Ricardo Velloso, was in Angola last week for consultations under Article 4, a few weeks after the IMF announced it would support Angolan National Bank (BNA) in adjusting to “the standards and international best practices,” non-compliance with which led to the end of relations with correspondent banks, in 2016, accentuating the currency crisis, by cutting the banking sector’s access to the purchase of US dollars.

The Africa Monitor Intelligence newsletter reported recently that, with the current economic difficulties, measures to enhance the attractiveness of the country for foreign investment and improvement of its external image are considered a priority, especially in financial circles.

According to the same source, IMF aid to the balance of payments is considered crucial and, among the main measures expected in a future agreement, is the devaluation of the Kwanza, and the IMF will not support the government’s programme without an intervention in the foreign exchange market (30% depreciation by the end of 2017 or the first quarter of 2018).

International reserves recently reached historic lows, due to the sale of foreign currency to commercial banks by the Angolan central bank. (macauhub)