Luanda — The International Monetary Fund (IMF) predicts that Angola's economy will grow in 2024 to over 3 percent, which will accelerate the diversification of the country's economy, the IMF's resident representative in Angola, Victor Lledo said Wednesday.
Speaking to the press after the presentation and public exhibition of the IMF Report on the Regional Economic Outlook for Sub-Saharan Africa: "A Light on the Horizon?," the IMF official said the Fund expects a recovery above 2023 levels.
Victor Lledo said he believes that 2023 was also a difficult year due to the exchange rate and inflationary pressures, which are expected to ease in 2024 with the resumption of fiscal consolidation.
To him, the 2024 State Budget clearly points in this direction putting the accounts on a path towards a debt close to 60% of the Gross Domestic Product, adding that it will be very important to create the fiscal space needed to boost investment in social areas.
"There are important recommendations, such as continuing to reduce fuel tax subsidies, which currently account for around 3.5 to 4 per cent of GDP and which take up a lot of space, the amounts of which could be used for education, health and social assistance,"Lledo said.
According to the official, the second area for creating this fiscal space is to continue efforts to increase the mobilization of non-oil tax revenues.
"This involves very strongly increasing the collection of VAT (Value -added tax) and property tax," he said.
He also recommended creating fiscal space through better debt management, with the aim to extend maturities and obtain financing at lower costs.
The Head of the IMF's Regional Studies Division, Luc Eyraud, on his turn, said at the level of the sub-Saharan African countries the double digit inflation is decreasing, however not in all countries.
Eyraud underlined that in relation to central bank targets, inflation remains high, with two thirds of countries (with an explicit inflation target) experiencing above-target, double-digit inflation.
Mr Eyraud added that guiding monetary policy is likely to be more difficult for countries with inflation that is still high or on an upward trajectory.
The IMF official said monetary tightening is therefore justified as inflation falls, and a more neutral policy stance should gradually be adopted.
The expert explained that in sub-Saharan African countries the pressure on exchange rates continues with global interest rates "higher, for longer", at a time when the United States is strengthening the weight of the dollar, increasing the burden of servicing debt in foreign currency.
Luc Eyraud emphasized that with reserve margins below comfortable levels, the regimes, without exchange rate parity, must allow the exchange rate adjustments, especially when reserves are low.
He emphasized that countries with currency exchange rate parity need a set of policies to maintain it without putting pressure on reserves, coordinate with other policies to alleviate the costs of adjustments and avoid distorting administrative measures.
The IMF stresses that most countries need a budget consolidation to preserve sustainability, preferably on the basis of revenue mobilization, prioritizing essential spending on education and health.
The report stresses that economic convergence is a challenge between resource-rich and resource-poor countries.
It also states that doubling the standard of living may take 20 to 30 years in the most diversified economies, noting that it is likely to take generations in resource-rich countries.
The IMF recommends investing more in education, increasing private sector participation, promoting trade integration and improving natural resource management, as well as accelerating economic diversification. HEM/AC/MRA/AMP