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Economy - Development

Angola doubled oil revenues in 2005

afrol News / Savana, 5 April - Angolan revenues based on the oil sector almost doubled last year compared to 2004, according to numbers from the International Monetary Fund (IMF). Concluding its consultations with the government of Angola in the last two weeks of March, the IMF indicates that oil revenues in 2005 had climbed to US$ 10 billion, while in the year before, Angola had earned about US$ 5.6 billion from its oil production.

Oil revenues last year gave Angolan authorities a fiscal surplus of around 0.7 percent of GNP, according to the financial institution. The IMF however emphasises that at the same time, there existed grave problems in the administration of these oil revenues.

A press release issued by the Fund is marked by an optimism which until recently was unheard of from the seat of this organisation, regarding the economic perspectives of Angola. According to the IMF, "the recovery of the Angolan economy is now becoming more firmly established" and the country's macroeconomic position had "strengthened during 2005."

Angolan net international reserves had risen somewhat more than US$ 4 million by end-2005 - equivalent to four months of national imports - while "nearly US$ 600 million from outstanding commercial oil-backed loans was paid off," according to the IMF.

The Washington-based Fund further observed that commercial activities in the non-oil sectors, in construction, distribution and diamond mining was "extremely limited" and that "poverty remains widespread." Despite of these negative factors, the IMF maintains that Angola's general economic perspectives are favourable, given that government policies keep their focus "on macroeconomic stabilisation and the development of the private sector."

The IMF indicates that, in reference to the increase in the Angolan oil production, the current year will see an overall economic growth rate of 15 percent. For the entire 2007 to 2010 period, the Fund foresees an average GDP growth rate of 13 percent.

The Washington-based economists however warn the Luanda government of the need to set public expenditure growth needs "in a medium-term context to avoid the boom and bust cycles that have undermined stability and development in some other oil-producing countries."

Further, having in mind the "limited administrative and absorptive capacity, a careful assessment of rising public expenditure is needed to assess its value for money and yield and to minimise potentially adverse macroeconomic consequences." Given this "limited administrative capacity, the planned increases in public expenditure in the 2006 budget pose considerable risks for the economy," the Fund warns.

Regarding poverty, the IMF notes that there is need for "an updated and extended" Strategy to Fight Poverty (ECP), which originally had been approved by the Fund in 2003 and is the basis for the institution's financial aid to Angola. An updated ECP would "help determine medium-term priorities" for the government, the statement says.

Advising on policy reforms, the Fund underlines that, having in mind Angola's fiscal position, authorities should "aim to reduce Angola's public external debt," given the priorities to initiate clearance of external debt arrears, "which currently exceed US$ 2 billion, in addition to late interest."

Angolan authorities are also advised of the "essential" need to introduce "more transparent management of public resources and an improved business climate" to secure further growth. Especially the Angolan oil sector on many occasions have been criticised for its lack of transparency.

The IMF adds that there remain "serious deficiencies" in the "governance of the oil and diamond sectors" and declares its opposition to government plans to establish a development bank that is to channel five percent of oil revenues to into subsidised loans to the private sector, without credit guarantees.

According to the Fund, experiences from other countries and in particular Angola had shown that ""such institutions are prone to poor governance, including privileged access and to emergence of non-performing loans, and that they promote inefficiency and moral hazard."

"There are more effective ways to address the problems of inadequate finance for micro, small and medium-size businesses including through microfinance, venture capital, and supportive action on contract enforcement," the IMF statement concluded.

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