World Report

Economic diversification and government transparency are the key to meeting the basic needs of a young population

Manuel Vicente, Chairman and Chief Executive Officer of Sonangol

ue to a lack of aid from the international donor community since the end of the country’s prolonged war in 2002, Angola has been forced to rely on expensive oil-backed loans from commercial banks to help finance its reconstruction. This had led to heavy debt servicing commitments, and although higher oil production and prices this year will contribute significantly, the International Monetary Fund (IMF) has predicted that the country’s external position will remain fragile throughout the remainder of this decade.

The price tag on Angola’s reconstruction is high; massive destruction to the country’s infrastructure must be repaired, a staggering number of landmines must be cleared (the number of landmines in Angola left behind from the war is estimated to be between 9 and 20 million), and human resources must be developed. The government has long expressed its desire to hold an international donors conference in order to increase aid for reconstruction, but has been unsuccessful in raising significant support from the international community.

Human development targets are a priority area of plans for growth

However, the Angolan government’s efforts to comply with IMF conditions on increased transparency and reformed macroeconomic structures seem to have abated somewhat the international aid boycott. The country will most likely enter an IMF Staff Monitored Programme this year, which will pave the way form IMF-backed loans and push ahead efforts to hold the donor’s conference.

In April of this year, the IMF praised the Angolan government for its provision of key economic data, including information on state-owned oil company Sonangol's quasi-fiscal operations, and its continuing efforts to improve its data compilation capacity. Fiscal relations between Sonangol, the Treasury and the Banco Nacional de Angola were brought into scrutiny, as lack of accountability between the three bodies has become the centre of international debate. The Angolan government has always maintained that poor accounting practices and a wildly fluctuating exchange rate were behind inconsistencies in the state budget, and has taken numerous measures this year to remedy the problem and improve transparency in the oil sector.

The horrors of Angola’s past war have put human rights high on the list of the current government’s agenda. International organizations are monitoring the country’s progress

Between the April IMF report and a second IMF report in July of this year, the Angolan government published an independent study of the oil sector carried out by KPMG, and declared it would disclose financial information on the oil-industry, allow an audit of Sonangol, and implement recommendations of the KPMG diagnostic study, in particular the establishment of a Petroleum Revenue Management Agency. In a further move in May, the government published the details of its latest $290 million signature bonus from Chevron Texaco for the extended concession of Block Zero (off Cabinda province). Manuel Vicente, Chairman and Chief Executive Officer of Sonangol states, “Economic growth and stability are critical factors in the reconstruction of Angola which is why we are working diligently to put in place the financial management systems necessary to facilitate the resumption of normal economic life for Angola’s people, to foster international trade and to encourage foreign direct investment in our country.” Sonangol is responsible for the management of oil and gas reserves in Angola.

In July of this year, the IMF recognised the government’s efforts: “Recent improvements in transparency, particularly regarding oil revenues, external debt, and transactions involving Sonangol, resulted in some commendable clarification of the government's overall fiscal position in 2003.” The organisation went on to suggest that consideration for a staff-monitored program would likely be granted once the 2005 budget was elaborated.