The International Monetary Fund (IMF) on Wednesday approved the disbursement of an additional $1 billion for Angola to respond to COVID-19 economic fallout, bringing total disbursements under the Extended Fund Facility (EFF) to $2.5 billion.
The IMF executive board also approved an augmentation of total access for Angola by about $765 million through the end of the EFF arrangement.
Angola’s three-year extended loan was approved by the IMF executive board on December 7, 2018, in the amount of $3.7 billion at the time of approval.
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IMF said Angola’s economy has been hit hard by a multifaceted shock stemming from the COVID-19 pandemic and the decline in oil prices, and the loan aims at “restoring external and fiscal sustainability, improving governance, and diversifying the economy to promote sustainable, private sector-led economic growth.”
According to the IMF, Angolan authorities have adopted timely measures to tackle the challenges rising from the shock and remain strongly committed to the economic program under the Extended Fund Facility with broadly satisfactory implementation.
The approval of $1 billion disbursement was approved after the executive board of the IMF completed the third review of Angola’s economic program supported by an extended arrangement under the Extended Fund Facility (EFF).
Ms. Antoinette Sayeh, Deputy Managing Director and IMF Acting Chair, said the Angolan authorities remain committed “to sound policies under the IMF-supported program despite a deteriorated external environment due to the COVID-19 pandemic, including negative impacts on public health, social protection, the budget, and public debt.”
According to her, the authorities have taken swift and decisive action, in response to lower oil exports and revenue, consistent with broad program objectives.
Sayeh added: “The authorities adopted a conservative supplementary budget for 2020, taking measures to increase non-oil revenue, and reining in non-essential expenditure. Despite the crisis, fiscal consolidation will continue, while creating space for adequate spending on health and social safety nets. The authorities will also persevere with implementing measures to strengthen public financial management.
“The authorities have secured debt reprofiling agreements from several large creditors to reduce risks related to debt sustainability. Continued vigilance in managing public debt is critical to mitigate such risks in the context of heightened oil-price volatility.
“The National Bank of Angola (BNA) has continued to reform the exchange rate regime, including migrating the bulk of foreign exchange transactions to an electronic platform. Efforts should continue to remove constraints toward reaching a market-clearing exchange rate. The monetary stance has been eased to help counteract the impact of the COVID-19 pandemic and the oil-price shock. However, there is little room for further monetary easing and the BNA should stand ready to keep inflationary pressures in check.
“Timely implementation of banking sector recapitalization and restructuring is essential to address financial sector risks. In light of the shortfalls identified by the completed asset quality reviews, the authorities are preparing to address capital deficiencies and enhance credit risk management frameworks. The authorities need to advance the restructuring of two public banks. These efforts will be supported by the forthcoming BNA and Financial Institutions Laws, enabling the authorities to strengthen bank supervision and resolution.
“Pursuing structural reforms is critical to diversify the economy and lay the foundations for private sector-led economic growth. The Government will need to remain steadfast in enhancing the business environment, strengthening governance, and fighting corruption. “