Angola needs longer plans for oil shocks

LUANDA – Angola’s prudent fiscal and monetary policies have helped re-build foreign exchange reserves but the country must develop medium-term economic plans to protect itself from possible oil price drops, the IMF’s representative in Luanda said on Friday.

Angola is Africa’s second-largest oil producer after Nigeria and depends on crude output for 95 per cent of its export revenues. It faced a balance of payment crisis after prices fell in 2008 and the country had to deplete its exchange reserves.’Foreign reserves are now back to about the level they were before the crisis, but I think it is premature to say that Angola is protected,’ IMF representative Nicholas Staines told Reuters.’Protecting the economy is not only about having enough reserves, but also a policy implementation structure to then implement the strategy. Part of that is having a medium-term macroeconomic and fiscal framework to actually respond to a crisis,’ he added.Staines said the government needs to move from an ‘ad hoc annual fiscal strategy’ to create a five- to ten-year plan on how it is going to spend, save and invest revenues from oil.’They are not quite there yet. Those sort of formulations take quite a bit of time to develop. It is difficult to pin down, but we could see them in about a year’s time,’ he added.The IMF official warned against overstating the risks posed by oil price drops to Angola’s bright growth outlook as the government ‘has given itself some room’ by basing the 2012 budget on a forecast of US$77 per barrel, much lower than current the Brent Crude market price of around US$120.The IMF expects the economy to expand 9,7 per cent this year.Angola has invested heavily in re-building its infrastructure destroyed by a 27-year civil war that ended a decade ago. Staines said the government must now ensure its spending is well prioritised, evaluated and implemented.’I think it is quite determined to improve its ability to get value for money. The free-spending days are over,’ he said.The IMF has praised Angola’s implementation of macroeconomic reforms during a US$1,4 billion loan programme agreed in 2009 and whose last tranche was disbursed last month, particularly monetary policy management that helped curb inflation and keep the kwanza currency stable.’To some extent, that is the easy part. Everybody benefits from a stable exchange and lower inflation,’ Staines said.’The much more difficult part is to deal with the sort of structural changes to address the more fundamental issues of growth outside the oil sector, which includes and extends to the rest of the population – inclusive growth,’ he added.Long-serving President Eduardo dos Santos’ government has been accused of mismanaging oil revenues and doing too little to fight widespread poverty.It came under the spotlight again last year when the IMF highlighted a US$32 billion discrepancy in public funds thought to be linked to the state oil company, Sonangol.The government has denied the funds are missing and said the discrepancy resulted from insufficient record-keeping. The IMF expects the government to explain much of the discrepancy.’They have explained the large majority of the US$32 billion, committed to finalise a report sometime later this year and have the numbers reviewed by the audit office,’ Staines said. – Nampa-Reuters