Angola: The cash-strapped kleptocracy seeks an IMF bailout

11 April 2016, Luanda – Angolan Finance Ministry officials seem to have learned nothing from the past. With low oil prices dragging the economy into crisis, the Ministry has had to turn to the International Monetary Fund (IMF) for a bailout.

President Dos Santos of Angola.

President Dos Santos of Angola.

But Angolan officials are so desperate to conceal the extent of their troubles, that their official statement pretends this is a ‘normal’ IMF intervention, not at all like the rescue that Portugal needed just a few years ago.

In fact, it’s exactly the same type of financial aid programme that Portugal got in 2011, just as the IMF reported at the time. Portugal was given a three-year aid plan. Angola too is now negotiating a three-year aid plan.

According to Min Zhu, the IMF Deputy Managing Director: “We have received a formal request from the Angolan authorities to initiate discussions on an economic program that could be supported by financial assistance from the IMF.” His statement continued: “We expect to start discussions with the country’s authorities during the upcoming Spring Meetings in Washington D.C. and in Angola shortly thereafter on an economic program that could be supported by a three-year Extended Fund Facility (EFF).”

Both have the same goal: to inject funds into Angola so it can balance its books while it implements the necessary structural reforms to make the economy more competitive. The only difference is that each plan is specifically tailored to each country’s particular circumstances. Some countries need reforms to their labour or energy markets (such as Portugal); others need to diversify their economy and make their tax system more efficient (such as Angola). In short, the targets may differ, but the parameters and desired outcome remain the same.

Extended Fund Facilities (EFFs) are different from the stand-by accord Angola obtained in 2009. EFFs last longer and have a longer repayment period. According to the IMF: “When a country is facing serious disequilibrium in the balance of payments in the medium term because of structural weaknesses which need time to be addressed, the IMF is able to assist the adjustment process with an EFF.”

Only recently President José Eduardo dos Santos told the MPLA central committee meeting that he had dipped into Angola’s Sovereign Fund to meet the February payroll for the country’s civil servants. No matter how the Finance Ministry tries to spin it, this move shows that Angola has a serious cash flow problem and can no longer resolve its economic and financial problems alone but needs both time and external support to work towards solutions.

 

  • Maka Angola
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