The representative of the International Monetary Fund (IMF) said on Wednesday that despite Angola’s debt to GDP ratio having “reduced drastically,” the country’s debt level “is still high and consumes large resources,” urging “fiscal prudence”.
According to Marcos Souto, Angola has to “preserve fiscal prudence,” because despite the ratio of debt to GDP (Gross Domestic Product) having reduced drastically, Angola’s level of debt “is still high and still consumes very large resources from the general state budget [OGE].
The resources consumed by servicing Angola’s debt, he stressed, “could be used for investment, in education, health and in other sectors of the country.
“So it is important that we continue with this fiscal prudence and that we do not give in to the incentive of spending more than we can or getting into more debt than we should,” the IMF official urged.
Souto, who was speaking on a panel on “Initiative for Economic Transformation in Angola,” as part of the third edition of the “Economic Briefing 2022,” held by Standard Bank Angola (SBA), also praised the reforms underway in Angola.
“It is very important to realise that Angola during the programme supported by the IMF implemented a series of very important, very difficult reforms and did so during a period that was particularly challenging,” he pointed out.
One of the big reforms “was to achieve macroeconomic stability, which is very important because without macroeconomic stability you cannot move forward in a sustainable and inclusive way.
With an “economic transformation, economic diversification, economic growth and to achieve that” there were “many initiatives to control public spending, to free up foreign exchange and reform in the structural area as well,” he noted.
The IMF’s intervention programme in Angola, Souto noted, ended in December, 2021: “I can say that for my institution it was a success, now the question is for us to look ahead,” he noted.
In relation to Angola’s current monetary policy, the IMF representative noted that although over the last few months there had been a “significant reduction” in inflation, “helped” by the appreciation of the kwanza and the depreciation of the dollar, “it is still reasonably high”.
“The latest figures point to 16.8% this is not low inflation, but more importantly we still have many uncertainties of the scenarios of the global economy,” he stressed.
Pointing to the Russian invasion in Ukraine and the fall of a missile in Poland as “scenarios of uncertainties” for global economies, he argued, however, that Angola has to be sure that its inflation is on a downward path.
“So, the uncertainties still exist and they are big and we think it would be important to really make sure that this inflation is on a downward path,” he argued.
What he observes, he argued, is that despite the restrictive policy of the National Bank of Angola “there is a growth in GDP of the non-oil sector.”
“That means that it does not seem to us that there is a restriction here in terms of monetary policy on economic activity in the non-oil sector,” he noted.
He also insisted on the need for “continued focus” on structural reforms, on the state privatisation programme (Propriv), considering that the Angolan government “has been working proactively on those reforms.
“It is important to continue restructuring the banks to safeguard financial stability, and here too although there has been a drop in bad loans we think that this is an issue that needs to be viewed with caution,” he warned.
According to the IMF representative in Angola, the banks should also take “initiatives to try to reduce that bad debt ratio.
“Stability vs Economic Transformation in Angola” was the central theme of this third “Economic Briefing 2022” of the SBA, held in Luanda.
