Angola Seeks IMF Help as Oil Price Hit The Economy
Angola is the second largest oil producer in Africa. As the oil price is in turbulence, its economy was hit severely. Next week the county will start negotiation with IMF for a three-year bailout program.
Angola has experienced a healthy economuc growth since ending its long civil war in 2002. Its growth was mainly supported by its oil and diamond. With a more than 10% annual GDP growth, Angola has maintained a steady growth.
However as the oil price continue to plunge, Angola was hit quite severly. As oil is accounted 40% of its GDP with more than 95% of the country's foreign exchange revenue. Therefore a high reliance on oil economy exposes its vulnerability in the economic growth, which hit the country as the oil price continue to sink.
In a statement as quoted by Reuters, Angola Finance Ministry admit the dependency on oil has made its economy vulnerable, as the country has exhausted its dollar inflows. The ministry admit to ask IMF to support in a three-year loan facility, although last month Finance Minister Armando Manuel told Reuters that he had no plan to ask for loans from IMF.
"The government of Angola is aware that the high dependence of the oil sector represents vulnerability for the public finances and the economy in an extensive way," the Finance Ministry said. "The government requested the support of the IMF for a supplementary programme ... taking account of the decline in the price of petroleum."
IMF Deputy Managing Director Min Zhu said in Washington that next week IMF and Angola will meet and discuss the term. IMF has prepared a three-year Extended Fund Facility for Angola, which according to Daily Mail, is a program designed for countries with balance of payments issues and slow growth or structural impediments. The program allow IMF members to borrow up to 145 %of its quota share in the Fund annually.
"The IMF stands ready to help Angola address the economic challenges it is currently facing by supporting a comprehensive policy package to accelerate the diversification of the economy, while safeguarding macroeconomic and financial stability," Zhu said.
Under the IMF's Extended Fund Facility program, Voice of America reported that Angola entitled to borrow about $1.5 billion a year. That amount is based on its share and current exchange rates, with a cumulative total capped at just over $4.5 billion, net of repayments.
Finance Ministry assured that Angola is ready to work with IMF to reform its fiscal discipline, simplify tax system. Angola is also ready to increase public finance transparency and the banking sector.
As the second largest oil producer in Africa,Angola was hit severely by by continuous drop of oil price. Angola will begin negotiation with IMF next week for a three-year bailout program.