Angola to open loan talks with IMF as oil price bites

Angola’s economy has grown rapidly since a 27-year civil war ended, peaking at 12 percent 3 years ago.

An oil platform of the US Pride company situated off the Angolan coast. Picture: Marcel Mochet/AFP

LUANDA - Angola will begin loan negotiations with the International Monetary Fund on a three-year loan facility next week as lower oil prices hammer the finances of Africa's second-largest crude exporter, the Finance Ministry and the IMF said on Wednesday.

Angola's economy has grown rapidly since a 27-year civil war ended in 2002, peaking at 12 percent three years ago, but a sharp drop in oil prices has sapped dollar inflows, dented the kwanza and prompted heavy government borrowing.

Oil output represents 40 percent of gross domestic product and more than 95 percent of foreign exchange revenue. Brent crude traded below $39 a barrel on Wednesday, down more than 30 percent compared with a year ago.

"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 in a statement.

"The government requested the support of the IMF for a supplementary programme ... taking account of the decline in the price of petroleum."

Finance Minister Armando Manuel told Reuters in March Angola had no plans to approach the IMF for loans.

In Washington, IMF Deputy Managing Director Min Zhu said discussions would start with Angolan authorities next week during the Fund's spring meetings on a three-year Extended Fund Facility. The talks will move to Angola shortly thereafter.

In a statement, Zhu said low oil prices have challenged oil exporting countries, especially those that have not yet diversified their economies.

"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.

The IMF's Extended Fund Facility program is designed for countries with balance of payments issues and slow growth or structural impediments. Under normal access, it allows a member country to borrow up to 145 percent of its quota share in the Fund annually.

For Angola, that could mean about $1.5 billion a year, based on its share and current exchange rates, with a cumulative total capped at just over $4.5 billion, net of repayments.

Angola will work with the IMF to design reforms aimed at improving fiscal discipline, simplifying the tax system and increasing public finance transparency and the banking sector, as part of loan talks, the Finance Ministry statement said.