A statement from the Angolan finance ministry has outlined that the country is to begin negotiations with the International Monetary Fund for a three-year loan facility in the coming week due to lower oil prices pressuring the finances of Africa’s second-largest crude exporter.
Angola’s economy has flourished since the end of a 27-year civil war which came to an end in 2002. The country enjoyed significant growth reaching 12 percent in 2013 although as oil prices have crashed the country has seen a drop in currency inflows and the government has been forced to borrow heavily.
Oil contributes 40 percent of GDP in Angola and over 95 percent of foreign exchange revenue.
In the statement, the Finance Ministry said:
“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 government requested the support of the IMF for a supplementary programme … taking account of the decline in the price of petroleum.”
It appears the country’s stance has changed over the past month as when Armando Manuel, Angola’s Finance Minister spoke to Reuters in March he said they had no plans to request loans from the IMF.
In response the IMF Deputy Managing Director Min Zhu has said that they will begin discussions with Angolan authorities next week whilst the IMF holds its spring meetings. The talks will then move to Angola to put in place a three-year Extended Fund Facility.
Zhu said the current oil rout has low oil prices has tested oil exporters, especially the country’s who do not yet have diversified economies with other sources of earnings.
Min Zhu said:
“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.”
The IMF’s Extended Fund Facility program allows a member country to borrow as much as 145 percent of its quota share in the fund each year. The facility is intended for countries which are struggling to balance payments due to structural issues or slowing growth. This could amount to $1.5 billion each year for Angola which would be capped at a total of $4.5 billion in total payments.