IMF sees progress in Angola, more transparency needed

LUANDA – Angola has made its oil-driven economy more transparent, but the African nation must do more to ease concerns about government corruption and unorthodox fiscal practices, the International Monetary Fund has said.

Sub-Saharan Africa’s second largest oil producer after Nigeria, Angola repeatedly ranks at the bottom of international corruption and transparency ratings. The IMF is among those urging its government to adopt fiscal reforms.”Angola has made progress in the area of fiscal transparency in recent years,” the IMF said in an internal report provided to Reuters this week by a highly placed source in the Angolan capital Luanda.”Nevertheless, in order to come closer to international best practice on key aspects of fiscal transparency, the government needs and should find it feasible to improve processes, procedures, and management in a number of areas,” it added.The report said Angola should strengthen its budget processes and the finance ministry website should be constantly updated as it was “practically impossible” for the public to monitor and assess how public funds are collected and spent.It said the government in Luanda, a mix of reformed Marxists and Western-leaning technocrats, should strive to meet the IMF’s Code of Good Practices on Fiscal Transparency, a widely accepted yardstick for government financial accountability.The document, which has not been published, was produced after an IMF mission visited Angola for discussions with authorities from May 24 to June 6.The IMF and Angola have been at loggerheads since 2002, when a leaked IMF report alleged that US$1 billion had vanished from Luanda’s coffers in the previous year.US-based Human Rights Watch added fuel to the fire when it said in a separate report that US$4 billion in oil revenue had gone missing from Angola’s treasury between 1997 and 2002.Angola, which has a high rate of poverty and one of the continent’s worst infant mortality rates, has dismissed suggestions the funds were siphoned by corrupt officials, instead blaming accounting problems for the discrepancies.TRANSPARENCY TIED TO OIL The transparency row has gained traction as Angola enjoys an unprecedented economic boom that has been fuelled by a dizzy marriage of sharply rising petroleum production and high oil world oil prices.State-owned-oil company Sonangol, which holds all the rights to the country’s oil, has been the biggest beneficiary of that windfall.It is not clear whether Angola’s 16 million people, most of whom live in dire poverty, have materially benefited.The government uses revenue from Sonangol to fund its spending and should stop doing so, the IMF said in the document.It also recommended that state companies – there are more than 250 of them – be more transparent about their accounting.”Sonangol’s responsibility for carrying out budgetary actions is no longer justified.Its use of oil revenue for debt service, subsidies, and other quasi-fiscal activities should be gradually eliminated, in the mission’s view, by end-2007.”Audited accounts of Sonangol and state-owned diamond firm Endiama should be published as soon as possible, it added.The IMF also raised concerns about the use of oil-backed credit – Luanda has received at least US$4 billion in such loans from China alone – and questioned the dual role of state firms in issuing concessions and being partners in the same projects.”In recent years the potential conflict of interest has been managed with greater transparency, but it is still present,” the report said.Nampa-ReutersThe IMF is among those urging its government to adopt fiscal reforms.”Angola has made progress in the area of fiscal transparency in recent years,” the IMF said in an internal report provided to Reuters this week by a highly placed source in the Angolan capital Luanda.”Nevertheless, in order to come closer to international best practice on key aspects of fiscal transparency, the government needs and should find it feasible to improve processes, procedures, and management in a number of areas,” it added.The report said Angola should strengthen its budget processes and the finance ministry website should be constantly updated as it was “practically impossible” for the public to monitor and assess how public funds are collected and spent.It said the government in Luanda, a mix of reformed Marxists and Western-leaning technocrats, should strive to meet the IMF’s Code of Good Practices on Fiscal Transparency, a widely accepted yardstick for government financial accountability.The document, which has not been published, was produced after an IMF mission visited Angola for discussions with authorities from May 24 to June 6.The IMF and Angola have been at loggerheads since 2002, when a leaked IMF report alleged that US$1 billion had vanished from Luanda’s coffers in the previous year.US-based Human Rights Watch added fuel to the fire when it said in a separate report that US$4 billion in oil revenue had gone missing from Angola’s treasury between 1997 and 2002.Angola, which has a high rate of poverty and one of the continent’s worst infant mortality rates, has dismissed suggestions the funds were siphoned by corrupt officials, instead blaming accounting problems for the discrepancies.TRANSPARENCY TIED TO OIL The transparency row has gained traction as Angola enjoys an unprecedented economic boom that has been fuelled by a dizzy marriage of sharply rising petroleum production and high oil world oil prices.State-owned-oil company Sonangol, which holds all the rights to the country’s oil, has been the biggest beneficiary of that windfall.It is not clear whether Angola’s 16 million people, most of whom live in dire poverty, have materially benefited.The government uses revenue from Sonangol to fund its spending and should stop doing so, the IMF said in the document.It also recommended that state companies – there are more than 250 of them – be more transparent about their accounting.”Sonangol’s responsibility for carrying out budgetary actions is no longer justified.Its use of oil revenue for debt service, subsidies, and other quasi-fiscal activities should be gradually eliminated, in the mission’s view, by end-2007.”Audited accounts of Sonangol and state-owned diamond firm Endiama should be published as soon as possible, it added.The IMF also raised concerns about the use of oil-backed credit – Luanda has received at least US$4 billion in such loans from China alone – and questioned the dual role of state firms in issuing concessions and being partners in the same projects.”In recent years the potential conflict of interest has been managed with greater transparency, but it is still present,” the report said.Nampa-Reuters