Review of economic policies in Angola expected as new President takes office

25 September 2017

The new President of Angola, João Lourenço, takes office this week in a difficult economic and financial context for the country, which is expected to force major changes in the country’s economic policy.

The Africa Monitor Intelligence (AMI) newsletter reported that Lourenço, who was sworn in on 26 September, has said within restricted circles that he is willing to reopen negotiations with the International Monetary Fund (IMF) regarding an “Extended Credit Facility”.

AMI also said that an agreement would allow the president to benefit from IMF financial and technical assistance, as well as improving the transparency of the country’s public finances and enhancing its external reputation by opening doors to assistance from other Western countries.

In a context of continuing economic and financial deterioration, as a result of continued low oil prices on international markets, the financial assistance provided by China has proven to be essential, but Chinese lending to Angola has been slowing.

International reserves reached historic lows, due to the sale of foreign currency by the National Bank of Angola (BNA) to the banking sector, and IMF assistance to the balance of payments is fundamental.

Among the main measures expected in a future agreement is the devaluation of the kwanza, and the IMF unavailable to support the government programme without intervention in the foreign exchange market (30% devaluation by the end of 2017 or in the first quarter of 2018).

A ministerial team is preparing a Government Action Programme, with measures to be implemented by the end of the year (“the first 100 days of governance”), with the ultimate goal of preparing the economic recovery after 2018.

The programme should, in the short term, impose austerity on a government level, which will have a much smaller number of ministers compared to the government of former president José Eduardo dos Santos.

In his first interview since the 23 August elections, in which the MPLA party secured a qualified majority, João Lourenço told Spanish news agency EFE he rejected the comparison with Mikhail Gorbachov, a Russian leader who ended Soviet communism, and opted for a Chinese comparison instead.

“We will work for this, but Gorbachev, no. Deng Xiaoping, yes,” said Lourenço.

In the interview, Lourenço said he wanted to attract more foreign investors to Angola and improve the business environment, by changing visa policy, improving governance and diversifying the economic base, beyond oil.

The planned privatisations will involve “those state companies that are dead weights for the country, which are not profitable, which are costing the state coffers a lot of money,” he said.

The Economist Intelligence Unit (EIU) said in its latest report on Angola that economic growth in the country will recover slightly between 2017-21 “due to international oil prices and moderate increases in local production, compounded by a continuing slowdown in growth in China,” the main destination of Angolan exports. (macauhub)