Oil Crash: Angola Requests Help from the IMF
For the Second Time in Seven Years, Angola Asks IMF for Bailout
April 12th, 2016
In 2014, the oil prices began to crash. In January 2015, the price per exported oil barrel was 36 dollars, 36% less than it was in January 2026. This had a huge impact in Angola's economy because this industry is, by far, the biggest in the country. The oil accounts are about 95% of export revenues; 75% of government income; and it represented 45% of the CDP, between the years of 2011 to 2013. As a result, on the last Wednesday, 6th of April, Angola requested for a bailout – an “economic program” that could be “supported by financial assistance”, in IMF words.
Angola's economy slowed down in the last two years (it went from a 6,8% growth in 2013 to a 3,5% growth in 2015) and it is expected to continue to slow down this year. This drop will have very serious consequences in the country's economy, once it is threatening directly the public accounts. The Government already felt the need to change last year's Budget, requiring a reduction in investiment spending.
The oil crash has also affected the value of the local currency, the Kwanza. It is down 16% this year, which led to a rising inflation, and to the National Bank of Angola to raise its interest rates. This makes the country's dollar-denominated debt more expensive to service. All these effects have spread to public affairs, because oil sales have such a big role on tax revenues.
It has only been 4 years since the last time Angola asked the IMF for help. In 2009 it was also about a crash in the oil prices, but the situation back then was very different from today. In 2009, Angola had just been involved in a civil war, and today, there are much more complex relationships with external economies, like its raising relationship with China.
This IMF program will last 3 years. The bailout value hasn't been announced yet, but it is expected to be higher than the 1400 million dollars assigned between 2009 and 2012. In addition to the bailout, it was announced that the IMF will provide, also, a complete “policy package to accelerate the diversification of the economy, while safeguarding macroeconomic and financial stability”, as declared.