A staff team from the International Monetary Fund (IMF), led by Mr. Mauro Mecagni, visited Luanda from January 11-20, 2012, to conduct the sixth and final review under Angola’s 27-month Stand-By Arrangement (SBA) with the IMF. The SBA, approved in November 2009 (see Press Release No. 09/425), provides financing of SDR 859 million, or about US$1.4 billion, of which SDR 773.01 million (about US$1.2 billion) has been disbursed to date. During its stay, the mission met with Planning Minister Ana Dias Lourenço, Finance Minister Carlos Alberto Lopes, Economy Minister Abrahão Pio dos Santos Gourgel, Central Bank Governor José de Lima Massano, other senior government officials, members of the National Assembly, and representatives of the banking, business, diplomatic, and academic communities.

At the end of the mission, Mr. Mecagni issued the following statement:

“The IMF staff team held very productive discussions with the Angolan authorities, focusing on performance under the SBA through 2011; the economic outlook for 2012, the large residual in the fiscal accounts for 2007-10, and related policy challenges. The mission and the Angolan authorities have reached a staff-level agreement on policies that would support the completion of the review under the SBA. The agreement is subject to approval by IMF Management and the IMF’s Executive Board. The Board discussion is expected to take place in late March 2012. Completion of the review will enable Angola to receive the last disbursement under the SBA, in the amount of SDR 85.9 million (about US$130 million).

“Angola’s economy continues on the path of recovery from the 2009 fiscal and balance of payments crises. Despite some difficulties in oil production, real gross domestic product (GDP) is estimated to have grown by 3.4 percent in 2011 due to high growth in the non-oil sector, while inflation had eased to 11.4 percent by year-end. Helped by higher oil prices, the external current account recorded a surplus equivalent to 7 percent of GDP while foreign exchange reserves at end-2011 reached the equivalent of 5.3 months of imports.

“The authorities’ macroeconomic policy stance in 2011 remained prudent. The fiscal balance recorded a surplus of 12.5 percent of GDP, up from about 7 percent in 2010. The non-oil primary deficit was contained at about 44 percent of non-oil GDP. A broadly stable exchange rate facilitated the achievement of the authorities’ inflation objective. Delays in oil revenue transfers to the Treasury imposed an unanticipated financing burden on the budget in the period through end-September, but the pace of transfers picked up in the fourth quarter; and a further correction in early 2012 is expected to ensure that budgetary financing levels are appropriately contained.

“Macroeconomic prospects for 2012 are broadly favorable, with new oil fields coming on stream expected to boost production above 1.8 million barrels per day. However, the outlook is quite sensitive to developments in world oil prices. Implementation of the government’s budgetary plans should produce a significant reduction in the non-oil fiscal deficit and help reduce inflation towards single digits. As the global environment remains unusually uncertain, the authorities are committed to achieving a further increase in foreign reserves to provide a stronger buffer against oil revenue volatility.

“Important measures have been adopted to ensure that oil revenues are transferred to the Treasury in a predictable and timely manner. These include the recent decree mandating the phasing out of quasi-fiscal operations by the state-owned oil company in 2012, other than those related to fuel subsidies and the servicing of some external credit lines. In addition, the authorities are investigating the large cumulative residual observed in the fiscal accounts for 2007-2010 (about US$32 billion—see box on p. 9 of the October 27, 2011 Staff Report for the 5^th Review under the SBA). While this investigation continues, preliminary data indicate that quasi-fiscal operations undertaken by the state oil company on behalf of the government, financed out of oil revenues but not recorded in the budgetary accounts, can explain a large part of the discrepancy. A more comprehensive analysis will be produced later in the year.

“The IMF team takes the opportunity to thank the authorities for the excellent cooperation provided throughout the mission.”