Last updated September 2009 Recent Political Developments - Possible delay to hold elections this year. The Presidential Election has been delayed. It will only take place after the approval of the new Constitution. The Government asked for 108 days extension from September, 2009. There have been discussions about possible changes the selection process for President from direct universal suffrage to the election by party slates.
- Angola is continuously reported as violating Human Rights. The imprisonment of a journalist has been reported and demonstrations by the population have taken place to protest against the destruction of their houses.
- Cuban President, Raul de Castro, 2nd visit to Angola. As a consequence of his visit, Angola will have 239 Cuban Doctors. Other recent official visits to Angola include the visit of the Presidents of Russia, South Africa, Guinea-Bissau, Gabon and the US Secretary of State Hillary Clinton.
- The ruling party MPLA is preparing their congress in December 2009 where they will decide who will be their candidate for the presidential elections.
Recent Economic Developments - Year-over-year inflation, as measured by the CPI, declined in August, although inflationary pressures remain and inflation will likely go up in the last quarter of the year. Chart 1. The year-over-year (y/y) inflation decreased in August (13.79%) compared to July (13.97%). The main contributor for the decline was the price of food, which increased 1.19% compared to 1.77% in the same month one year ago. The inflation in August (0.87%) was also lower than in the previous month (1.18%), reflecting as well a slower price increase of food (1.19% compared to 1.91% in July). On the other hand, the y/y “Core-inflation,” meaning CPI excluding “food and non-alcoholic beverages”, increased from 8.92% in July to 9.19% in August. (In this brief “core inflation” is the CPI index after excluding the “food and non-alcoholic beverages” component from the consumer basket, which represents 46.09% of total consumption. The core-inflation was calculated by creating a series of all the other components, recalibrating their respective shares of the consumption basket to sum 100%, and creating the new “core-inflation” index.) Despite the small decrease in August for overall CPI (monthly and year-over-year), the persistent devaluations of the Kwanza in the secondary and parallel markets will continue to pressure prices of imported goods upward and pushing inflation up, especially in the last three months of the year when imports of goods for the holidays increase substantially.
- Angola’s Stand-By Arrangement with the IMF. The government of Angola concluded negotiations with the International Monetary Fund (IMF) on a Stand-By Arrangement, which is expected to be presented to the IMF Executive Board in November. According to the Press Release, the 27-month program “aims to alleviate immediate liquidity pressures, boost market confidence, and restore a sustainable macroeconomic position.” Additionally, the press release states that the program “is centered on the authorities’ objective of strengthening the public finances through an appropriate tight 2010 Budget, backed by firm policies on monetary management.” Although the influx of foreign currency from such programs is significant to support the Balance of Payments and international reserves, the positive credibility shock is even more important. The government’s request for an IMF mission and successful negotiations of a program shows the authorities decision of adopting a set of macroeconomic policies (in the short and medium run) designed to preserve macroeconomic stability and to strength policy management to assure sustainable economic growth.
The Effects of the Global Crisis in Angola: Has the Storm Passed? The August macro brief stated that there was light in the end of the tunnel but that the tunnel seemed to be long and many challenges remained ahead. Some of the main concerns have eased lately. The price of oil has recuperated substantially since the beginning of the year. In August 2009, the average price of Girassol (oil reference for Angola) remained 34% below the level registered one year ago and 45% below its peak of July 2008, but 80% above the bottom price in December 2008. Oil production has also increased 10% from its lower levels of February (Chart 3). The increase in production and price of oil resulted in improvements of tax oil revenues around 70% higher in July compared to February, easing the fiscal position of the government. Net foreign reserves stabilized and even grew slightly in July and August after dramatic decreases since November 2008. There are, however, challenges to be solved. Large imbalances remain in the foreign exchange market as the limited amount of foreign currency sold to the banks by the Central Bank has not been enough to satisfy the demand, and the gap between rates in the primary (Central Bank and commercial banks), secondary (commercial banks and clients), and the parallel market (informal markets) have been increasing (above 22% between primary and parallel markets). The normalization of the foreign exchange markets is an important step in the process of solving the economic imbalances. For some months now, the Central bank has sold limited amount of dollars at a fixed rate using a formula to allocate them among commercial banks, resulting in accumulated demand to be satisfied as more foreign currency become available. As the Current Account improves (due to increases in price and production of oil and likely decline of imports as the economy slowdown), foreign reserves starts increasing, the Central Bank would be able to offer larger quantities of dollars in a systematic and consistent way and auctions (volume and price) could return with limited risk of strong devaluation of the Kwanza in the primary market. This is especially true as macroeconomic policies gain further credibility with the Stand-By Arrangement with the IMF and additional reserves could be expected as disbursements from the IMF start. The normalization of the primary market will have reflections in the secondary and parallel markets and rates will start converging again. The second large challenge consists in the reduction of government arrears with suppliers. As the fiscal position improves and demand for government bonds increases, the government would be able to reduce late payments and suppliers would also be able to pay their bets with banks, reducing the ratio of problem loans to total loans. Despite these imbalances, the different indicators discussed above point to a more optimistic view of the economy suggesting that the worse part of the impact of the global crisis in the Angola’s economy has passed. Nevertheless the situation continues to require close monitoring and careful conduction of the macro policies. World Bank Assistance to Angola: Bank Strategy Assistance to the government and society: Angola joined the World Bank Group in 1989, and World Bank assistance began in 1991 with a credit from the World Bank's International Development Association (IDA) for economic management capacity building. The World Bank has established a Country Office in Luanda from which country dialogue and project oversight take place. The World Bank works closely with the International Monetary Fund (IMF), UN agencies, donors and non-governmental organizations active in Angola through the country office. The World Bank Group supports Angola’s efforts to reduce poverty and to promote sustainable economic growth. Working in close partnership with the Government, development partners and civil society, the World Bank seeks to promote shared growth for poverty reduction through empowering institutions and all Angolans. The World Bank is currently developing a Country Partnership Strategy (CPS) which will cover the period 2010-2013. IDA’s previous assistance strategy to the country was set out in the Interim Strategy Note (ISN) which ended in June 2009. The ISN’s support for the government’s program was based on three pillars: - strengthening public sector management and government institutional capacity;
- supporting the rebuilding of critical infrastructure and the improvement of service delivery for poverty reduction ;
- promoting growth of non-mineral sectors.
These pillars were implemented through support for the activities started under the 2005-2006 ISN, and modest new lending. It entailed analytical and advisory work that built on past efforts, complemented new projects, and helped inform and prepare the ground for the Country’s Strategy under preparation. Investment and assistance to the private sector: The International Finance Corporation’s (IFC) activity is critical to the third pillar of the Bank’s Interim Strategy Note (2007-2009) – “promoting growth of the non-mineral sectors.” IFC is increasing access to financing for Small and Medium Enterprises (SMEs); providing trade finance and credit lines to local commercial banks. With the World Bank it will develop a strategy to support the newly formed Angolan privatization agency with advisory services and ultimately financing to privatized companies. IFC holds a growing portfolio of US $12.2 million with key industries in financial markets, general manufacturing and services. To date it has three major investments: - A 15 % shareholding in NovoBanco Enterprise Bank of Angola S.A.R.L., a bank targeting medium and small enterprises. The Bank has a capital base of US $4 million and is expected to have a strong developmental impact by helping to create new jobs, accelerate business growth, and boost confidence in the banking sector. To date, the bank has disbursed more than 1,000 loans with a value of USD $6 million to Luanda’s small entrepreneurs.
- A $1 million equity investment in Nova Sociedade de Seguros de Angola, S.A.R.L. (Nossa), which represents 16.7 % of Nossa’s share capital. Nossa is the third insurance company in Angola and the first private insurance company.
- IFC provided a US $10 million loan to Odebrecht Serviços no Exterior, a wholly owned subsidiary of Construtora Norberto Odebrecht of Brazil. The financing will be used for infrastructure improvements in the Luanda Sul urban development project. IFC will also provide technical assistance on Odebrecht’s HIV/AIDS program in their Angolan operations. This work will likely lead to further involvement with the company.
The Multilateral Investment Guarantee Agency's (MIGA) provides guarantees to private companies investing in client countries. MIGA's outstanding portfolio in Angola consists of two guarantees in the services and manufacturing sectors with a gross exposure of US $6.4 million. In addition, MIGA’s on-line investment promotion services (www.fdixchange.com and www.ipanet.net) feature 103 documents on investment opportunities and the related legal and regulatory environment in Angola. Contacts For cotnacts, click here. |
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