Just Like Nigeria, Fall in Oil Prices in the International Market Cripples Angolan Economy

Oil producing African country, Angola has joined Nigeria in swallowing the bitter pills of economic downturn due to over-reliance on crude oil.

  

Angola said Wednesday it had asked the International Monetary Fund for help after the crash in oil prices ravaged government finances. The IMF said discussions would begin next week in Washington on what could be a three-year support plan for the government.

“The sharp decline in oil prices since mid-2014 represents a major challenge for oil exporters, especially for those economies that have yet to become more diversified,” the Fund said in a statement.

 

“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.”

Angola has depended on oil production for 95 percent of its export earnings and more than half of government receipts. In a statement, the government said it “is aware that the high reliance on the oil sector represents a vulnerability to the public finances and the economy more broadly.”

Angola “will work with the IMF to design and implement policies and structural reforms aimed at improving macroeconomic and financial stability, including through fiscal discipline,” the statement read.

 

IMF three-year Extended Fund Facility programs usually offer financial support for government finances while requiring disciplined reforms, which often include spending cuts and stronger tax collection efforts.

Angola had a previous three-year support program from the IMF, a $1.4 billion Stand-By Arrangement during 2009-2012. This helped the country resolve domestic debts, stabilize its exchange rate, and shore up its international reserves.

Under the proposed new program, the government said it “is committed to improving transparency in the public finances and the banking sector.”

 

“There is a strong belief within the government that the continued drive towards enhanced transparency can be accelerated by partnering with an institution like the IMF.”