London, UK | – Angola plans to start talks with the International Monetary Fund (IMF) about a loan to help the oil-producing economy cope with the slide in oil.
State revenue in Africa’s second-biggest producer of the commodity has plunged due to the weakening of crude prices since mid-2014, while the kwanza has declined almost 18 percent against the dollar this year. With the government relying on the oil industry for about 95 percent of export income, economic growth slowed to 3.5 percent last year from 6.8 percent in 2013, according to the IMF.
“The government has requested support of the IMF to complement the already steadfast response to the decline in oil prices,” the Luanda-based Finance Ministry said Wednesday in an e-mailed statement. It’s “aware that the high reliance on the oil sector represents a vulnerability to the public finances and the economy more broadly,” the ministry said.
Angola will work with the IMF to create policies aimed at strengthening “fiscal discipline,” simplifying the tax system, and improve transparency of public finances and in the banking industry. The government of sub-Saharan Africa’s third-biggest economy is also implementing a program to reorganize its fuel-subsidy program, the ministry said.
“The request indicates that the Angolan authorities are gradually realizing the scale of their country’s economic problems,” John Ashbourne, a London-based economist at Capital Economics Ltd., said in an e-mailed note to clients. A loan should reduce the risk of a balance of payments crisis, “but the fiscal austerity that is likely to accompany any deal supports our view that growth will be painful. ”
The IMF in a separate statement on Wednesday confirmed that talks are planned with Angola for a possible three-year extended fund facility loan program. Negotiations are expected to start during the IMF’s annual spring meetings in Washington next week, Angola’s Finance Ministry said.