The International Monetary Fund (IMF) Executive Board has concluded its 2024 Article IV consultation with Angola. The consultation revealed a recovery in Angola's economy, largely driven by the oil sector's rebound, with GDP growth estimated at 3.8 percent in 2024, surpassing earlier projections. This recovery extended to the non-oil sector as well.
However, fiscal consolidation efforts have weakened due to increased capital expenditures and slow progress on fuel subsidy reform, leading to erosion of financial buffers built during the 2018-21 EFF-supported program. Despite these challenges, the public debt-to-GDP ratio saw a decline due to higher nominal GDP growth and sustained primary surpluses.
Inflation remains high, influenced by exchange rate pressures and increased food prices. The central bank responded by raising the monetary policy rate by 150 basis points in 2024 and streamlining liquidity management. This resulted in better alignment of the interbank rate with the policy rate. The Angolan currency depreciated over 10 percent against the U.S. dollar last year, impacted by adverse market expectations and significant external debt service.
Looking ahead, economic growth is expected to continue at around 3 percent in 2025, although risks remain high. Inflation is projected to ease as cost-push factors diminish. Efforts to resolve maintenance bottlenecks in key extraction blocks and incentivize production are anticipated to support oil production continuity.
Nonetheless, external debt service obligations limit development spending and highlight ongoing dependency on oil revenues for sustainable growth. Political factors could also pose risks; presidential elections are scheduled for 2027 which may delay economic reforms.
"Executive Directors agreed with the thrust of the staff appraisal," stated an IMF summary of their assessment. "While welcoming the economic recovery, they highlighted the continued risks from oil price volatility and debt vulnerabilities."
Directors emphasized structural reforms to strengthen macroeconomic stability and promote diversified growth. They stressed fiscal consolidation's importance to create space for development needs and urged fully implementing fuel subsidy reforms alongside measures protecting vulnerable populations.
Monetary policy was advised to maintain a tightening bias for durable disinflation while adhering strictly to government loan ceilings to safeguard reserves and manage inflationary pressures effectively.
Directors also addressed financial sector vulnerabilities, emphasizing AML/CFT weaknesses' resolution for removal from FATF’s grey list and supporting new supervisory regulations implementation for robust financial stability frameworks.
In conclusion, Directors supported Angola's National Development Plan focusing on market-friendly policies enhancing governance and human capital development while deepening financial inclusion.
The next Article IV consultation with Angola is expected within a standard annual cycle.