IMF wants more austerity in Angola to combat budgetary slippage since 2021

The International Monetary Fund (IMF) warned today that Angola must deepen its budgetary consolidation efforts and combat the budgetary slippages that have emerged since the end of the program with the Fund in 2021.

“Fiscal consolidation efforts have slowed and the buffers built during the Extended Financing Programme from 2018 to 2021 are being eroded by budgetary slippages stemming from higher capital expenditures and slower fuel subsidy reform,” reads the Fund’s analysis of Angola’s economy.

The return to a path of fiscal consolidation “is essential to strengthen fiscal buffers and create space for development needs”, which is why the fund stresses “the importance of fully implementing fuel subsidy reforms, accompanied by mitigation measures aimed at protecting the most vulnerable and stepping up efforts to mobilize non-oil revenues”.

In Article IV, IMF executives welcomed last year’s economic recovery, but “highlighted persistent risks from oil price volatility and debt vulnerabilities” and stressed “the urgency of accelerating structural reforms to strengthen macroeconomic and financial stability and promote diversified and inclusive growth.”

In the annual analysis of all IMF member countries carried out by the fund's economists, it is said that the kwanza fell 10% last year against the dollar and that “adverse market expectations and high external debt service continue to weigh on the exchange rate”.

After an economic expansion of 3.8% last year, the IMF expects Angola to slow growth to 3%, driven mainly by the non-oil sector, and inflation to fall to an average of 21% this year.

Oil production is expected to improve slightly to 1.262 million barrels per day in 2024, from 1.266 million this year, but it is the price of oil that will hurt public finances the most, as the IMF predicts the country will take in $31.5 billion (€30 billion) this year, down from $35.4 billion (€33.7 billion) last year.

“High external debt service limits development spending and dependence on oil continues to be an obstacle to sustainable growth,” IMF economists warn again, also warning that “liquidity risks could intensify if financing conditions deteriorate, further reducing social spending and putting pressure on the exchange rate.”