In Angola, adjusting to the “new normal” for oil prices has been particularly painful due to the economy’s lack of diversification. Growth has slowed sharply at a time of currency rationing and drastic cutbacks in public spending. The current upturn in the oil market should have a favourable impact, albeit without triggering a real easing of external or fiscal constraints. This environment raises the question of the sustainability of public and external debt, notably in the medium term.
In Angola, the adjustment to the new balance prevailing in the oil market has been particularly painful due to the lack of economic diversification. In 2013, when Angolan crude oil prices still surpassed USD 100 a barrel, the oil sector was the source of 98% of export revenues, nearly 75% of fiscal receipts, and more than 40% of the economy’s entire value added.
■ Adjusting to the “new normal” for oil prices
The sharp drop in oil prices starting in mid-2014 triggered a significant tightening of fiscal and external constraints, requiring macroeconomic policies to be adjusted rapidly. According to our estimates, government primary expenditures were slashed by more than 40% in real terms (deflated by the consumer price index) in 2015 and by another 20% in 2016. More importantly, the National Bank of Angola (BNA) has devalued the kwanza’s official exchange rate by almost 70% against the dollar since September 2014 (from AOA 97.8 to AOA 165.9 to the dollar), while strictly rationing foreign currency supply to preserve foreign exchange reserves. A priority list1 was established to regulate access to foreign currency at the official exchange rate, and a special tax was levied on capital outflows associated with technical assistance and service contracts. At the same time, LUIBOR, BNA’s benchmark rate, was raised by 725 basis points (from 8.75% to 16%) to contain the inflationary pressures resulting from the kwanza’s depreciation and foreign currency rationing.
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by Valérie PERRACINO-GUERIN