IMF praises Angola’s economic resilience amid 2023 challenges

The International Monetary Fund (IMF) has lauded Angola’s economic resilience, highlighting significant improvements since the country’s financial assistance program in 2021. Despite facing substantial challenges in 2023, Angola’s ability to repay its IMF loan remains robust, according to the Fund.

“The capacity of Angola to repay [the loan] to the Fund is adequate, although subject to risks. The country remained resilient in the face of significant challenges in 2023, including reduced oil production and prices,” reads the IMF’s analysis of the Angolan economy.

This evaluation was published today as part of the post-financial assistance program review, which spanned from 2018 to 2021 and included a financial package of $4.5 billion.

The IMF attributes Angola’s economic fortitude to the government’s steadfast commitment to economic reforms initiated during the financial assistance program.

These reforms span key areas such as fiscal management, revenue mobilization, debt management, monetary policy, and financial stability.

Economic growth in Angola remained positive in 2023, with the economy expanding by 0.9%. This growth was primarily driven by a resurgence in oil production during the last quarter of the year.

The IMF projects a more stable expansion rate of 3.2% in the medium term, contingent upon the government’s continued implementation of structural reforms and its diversification program.

Despite inflation reaching its highest levels in recent years due to currency depreciation and supply constraints, the IMF expects inflation rates to start declining in the second half of the year.

Improved transmission of monetary policy to the real economy and the easing of supply shocks are anticipated to contribute to this reduction.

The IMF forecasts a drop in inflation from 25.7% this year to 16.3% by 2025. Concurrently, the debt-to-GDP ratio is expected to decrease from 74% last year to 58.5% this year, and further to 52.1% next year.

Among its recommendations, the IMF stresses the importance of maintaining fiscal adjustments and streamlining expenditures.

It highlights the necessity of continuing the reform of fuel subsidies while providing support to the most vulnerable populations and adopting a proactive communication strategy.

Additionally, the IMF underscores the importance of coordination between the Ministry of Finance and the National Bank of Angola in financial market operations.

This coordination is essential for managing interbank liquidity and enhancing price and fiscal stability.

The Fund concludes that bolstering financial stability and implementing a comprehensive set of structural reforms are crucial for improving the business environment and sustaining growth, particularly in the context of a long-term decline in oil revenues.