LONDON – Angola’s fiscal deficit will have shrunk to less than 1 percent by the end of the year, while its battered currency has reached equilibrium thanks to an economic stabilisation programme, central bank Governor Jose de Lima Massano said on Monday.
With oil accounting for more than 90 percent of its exports, Angola’s economy has been battered since the 2016 oil price tumble, and falling production has recently added to its woes. Faced with poorer than expected economic growth this year, the country sought financial support from the International Monetary Fund in August.
However, the macroeconomic stabilisation plan launched since the new government under President João Lourenço came to power just over a year ago had helped improve the situation, Massano told Reuters in an interview. The fiscal deficit, which stood at 7 percent at the end of 2017, will have shrunk to around 1 percent by year-end, he said.
“We allowed the currency to depreciate by over 46 percent, and when we started the year our currency was one of the top five over-valued currencies,” Massano said on the sidelines of the FT Africa Summit in London.
The gap between the exchange rate for the kwanza on the formal and informal markets had narrowed from around 150 percent at the start of the year to some 20 percent now, he said. However, there was still a dollar shortage in the country.
“We still have a demand for foreign currency that is not really covered in the time frame that most businesses would like to see.”
The dollar liquidity squeeze in Africa’s second-largest oil producer has made it difficult for foreign companies to repatriate profits and discouraged many from investing.
Adding to Angola’s woes is a hefty debt burden. Public debt, including the debt of the state-owned oil company Sonangol, reached 64 percent of gross domestic product in 2017, according to the IMF. However, Massano expected that the country may return regularly to international bond markets.
“We are now closing the budget for next year,” he said. “My sense is that the need to finance the economy will remain. If we manage to keep the economy on the right track, it will make a lot of sense to go there (to international capital markets), and get it on better terms, and keep working with the markets.” – Reuters