Angola: The road to economic reform
The dramatic drop in oil prices that started in mid-2014 substantially reduced tax revenues and exports, with growth coming to a halt and inflation accelerating sharply.
This brought to the fore the need to address vulnerabilities more forcefully and diversify the economy away from oil.
The authorities undertook steps to mitigate the impact of the oil price shock, including a significant—17½ percent of GDP—improvement in the non-oil primary fiscal balance over 2015–16, mainly through spending cuts that included the removal of subsidies, and devaluing the kwanza against the U.S. dollar by over 40 percent between September 2014 and April 2016. The exchange rate, however, was re-pegged to the U.S. dollar in April 2016.
Angola was for many years mired in civil conflict, which destroyed its physical and human capital, and undermined the state’s ability to function normally.
Since the conflict ended in 2002, the country has been working to improve its governance, and the 2017 election of a new president has helped regain confidence in Angola's overall outlook.
As the sub-Saharan region’s second largest oil exporter, Angola was hard hit by the decline in oil prices that started in mid-2014, the pain of which is still being felt. With stringent attention to needed reforms, the economy could grow modestly in 2018.
Policies in the run-up to the August 2017 elections—fiscal expansion and a pegged exchange rate—led to a further erosion of fiscal and external buffers. The overall fiscal deficit worsened to 6 percent of GDP and public debt, including that of the state-owned oil company Sonangol, reached 64 percent of GDP in 2017.
Gross international reserves declined to $17¾ billion—equivalent to 6 months of imports—while the spread between the parallel and official exchange rate was 150 percent in 2017.
