A staff team from the International Monetary Fund (IMF), led by Mr. Mauro Mecagni, visited Luanda from January 16 to January 29, 2013, to conduct the Second Post-Program Monitoring mission following the completion of the Stand-By Arrangement (SBA) with Angola.
During its stay, the IMF staff team met with Ministers and senior government officials, members of the National Assembly, and representatives of the banking and business communities. The SBA was approved in November 2009 in an amount equivalent to SDR 858.99 million (then about US$1.4 billion), and the sixth and final review was completed in March 2012.
At the end of the mission, Mr. Mecagni issued the following statement: "The IMF staff team very held productive discussions with the Angolan authorities, focusing on macroeconomic developments in 2012, the budget proposal and outlook for 2013, the government's medium-term development plans, and related policy challenges. The Executive Board discussion is expected to take place in March 2013.
"In 2012 Angola attained robust economic growth, a stronger fiscal position, single digit inflation, a further build-up of international reserves, and a stable exchange rate. Against this backdrop, the authorities moved forward with a program of institutional reforms, strengthening some key areas in fiscal, monetary and financial management.
"Macroeconomic performance in 2012 was bolstered by a recovery in oil production and a continuation of robust non-oil sector growth. Overall real gross domestic product (GDP) growth is estimated to have accelerated to over 8 percent. Inflation declined to 9 percent by year-end, below the authorities' target, reaching single digits for the first time in a decade. Strong oil revenue propelled the overall fiscal balance to a surplus of 8.5 percent GDP. International reserves continued to rise, to the equivalent of 7.3 months of 2013 imports at end-December.
"Macroeconomic prospects for 2013 are favorable despite a still uncertain global environment. International prices for Angolan oil are projected to remain high and oil production to grow by about 4 percent, to over 1.8 million barrels per day. Non-oil sector growth, bolstered by a scaling-up of the public sector investment program aimed at completing reconstruction and addressing key infrastructure gaps, is expected to exceed 7 percent in 2013. International reserves are expected to rise at a more modest pace and inflation to remain in single digits.
"The 2013 budget proposal represents an important step toward achieving "universal and unified" fiscal accounts in Angola. For the first time, the draft budget incorporates all quasi-fiscal operations previously undertaken by the state oil company. It also reflects the impact of measures to rein in the fiscal burden of concessionaire operations. These are important fiscal reforms.
"The draft budget implies a sizeable increase in public spending and a shift to a moderate overall deficit. As a result, the non-oil primary deficit is projected to increase significantly. The authorities will need to carefully monitor the impact on inflation and the balance of payments. It will also be critical to ensure a timely and complete transfer of oil revenue from the state oil company to the Treasury. In this context, the process of reconciling current oil revenue flows is continuing, as are the authorities' efforts to fully explain the large cumulative residual in the 2007-2010 fiscal accounts.
"The authorities' strategic objective of economic diversification requires effective programs to close the infrastructure gap, develop human capital, and lower the cost of doing business in Angola. In pursuing this important objective, the authorities will have to balance spending priorities and sequence implementation to ensure a strong payoff to economic growth while preserving macroeconomic stability.
Diversifying financing sources and instruments is also advisable, in particular through the development of a local currency bond market and the adoption of best practices for first-time bond issuers in international markets in terms of transparency and disclosure of information to potential creditors.
"The new foreign exchange law for oil companies is being implemented. The volume and size of oil sector-related transactions going through the domestic banking system will increase significantly, providing an impetus for financial market development. It will be important to ensure high standards of efficiency in the payments system, including for international transactions. Developments will need to be monitored carefully, through the implementation of measures undertaken to strengthen banking supervision.
"The IMF team takes this opportunity to thank the Angolan authorities for the substantive discussions and excellent cooperation received during the mission."