In a statement at the end of a staff mission to the capital Luanda on Wednesday, the IMF estimated a fiscal surplus of about seven per cent of gross domestic product (GDP), or US$2,2 billion, in 2005, resulting primarily from a rise in government oil revenues to US$10 billion in 2005 from US$5,6 billion in the previous year.

"Rapidly rising production and revenues from the oil sector have been the main driving forces behind the improvements in overall economic activity and in macroeconomic conditions," the IMF said.

Commercial activity outside oil, construction, and diamonds was however still limited, it added.

It said prospects were "promising" for further economic growth and strong public finances, noting that oil revenues could double in US dollar terms between 2005 and 2010, even if the oil prices slipped, as new oil fields were started.

The global lender said as the country's revenue improves, the government should aim to reduce its external debt, which currently exceeds US$2 billion in addition to late interest.

It suggested the government resume debt payments falling due and eliminate its reliance on expensive oil-backed loans from commercial banks.

The IMF said the government should also restart its policy of reducing petrol subsidies and allocate some of the resources instead to reducing poverty.

It also said calculations to determine payments to the state oil company Sonangol from the government need to be updated to reflect changes between costs and prices in the oil sector.

"Sonangol would appear to have received substantial windfall gains from the government since oil prices began to rise in 2003," it added.

The IMF urged the government to improve transparency of government revenue and fiscal accounts and "serious deficiencies that remain in the governance of the oil and diamond sectors".

The lender said Angola's proposal to set up a development bank, which will direct up to five per cent of the government's oil revenues for subsidised lending to the private sector, was a "retrograde step".

"The evidence from other countries is that such institutions are prone to poor governance, including privileged access, and to emergence of non-performing loans, and they promote inefficiency and moral hazard," the fund said.

It said there were other ways to address problems of inadequate financing for private sector businesses including through microfinance and venture capital.

- Nampa-Reuters

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