Economic news
IMF support for Angola announced
The International Monetary Fund (IMF) approved a 27 month Stand-By Arrangement (SBA) with Angola on 23 November, totalling 858.9 million SDR (Special Drawing Rights) approximately US$1.4 billion. This ends a stand off lasting more than 10 years between the IMF and the Angolan Government, with the latter thought to be concerned about IMF “conditionality” and until now having the ability to raise finance for its budget from other sources.
The Angolan economy has suffered due to the sharp drop in oil prices (now rising again) and diamond prices (Angola is world’s 4th largest diamond producer) and the global economic crisis which hit the country during a period of rapid expansion largely based on oil revenues. The subsequent large drop in oil revenues caused a sharp slowdown in the economy, weakening its fiscal and external positions, the depreciation of the exchange rate and a rise in inflation.
The key pillars of the program are: i) a determined fiscal effort that aims to reduce the non-oil primary fiscal deficit significantly in 2010 and that still provides adequate resources for social spending and vital infrastructure projects; ii) an orderly exchange rate adjustment backed by tight monetary policy to normalize conditions in the foreign exchange market; and iii) measures to safeguard the financial sector.
The IMF believes that Angola has to restrain its public expenditure and the agreed programme should allow for an adequate level of social spending and infrastructure investment. The SBA allows for 30 per cent of total central government expenditures to be spent on social issues over the duration of the programme and support for government capital projects in 2010.
Nigeria overtakes Angola in crude oil production
Angola became Africa’s second largest oil producer in December as Nigeria’s oil production increased from 1.941 million barrels per day to 1.984 million in December 2009. Angola’s oil production slipped at the same time from 1.856 million barrels per day from 1.877 million. However, US oil company Chevron expects to increase its daily production of oil by 8.4 per cent from 535,000 barrels per day to 580,000.
Oil experts predict that Angola’s oil exports will fall in March to 1.79 million barrels per day although it will remain above the quota of 1.52 million barrels set by the Organisation of Petroleum Exporting Countries (OPEC).
Angola signed an oil deal with India on Wednesday 27th January aimed at strengthening cooperation in the oil sector. The memorandum was signed between India’s minister of oil and natural gas, Murli Deora and Angola’s national oil company Sonangol. In 2009 Angola supplied about 43 million barrels of oil to India, accounting for about 6.5 per cent of Angola’s total exports. Angola’s oil minister, Jose Botelho de Vasconcelos, said the deals "established a way of deepening business co-operation" between the two countries.
Sonangol wins Iraq contract
Sonangol, the Angolan state run oil company, has won a profitable but potentially dangerous oil deal in the Nineveh region of Iraq. Sonangol was one of a number of oil companies that were awarded deals in Iraq’s second round of contracts, held in December.
It is estimated that the company will receive remuneration fees of between $5 and $6 a barrel, in the fields estimated to contain 1.7 billion barrels of oil. Sonangol is expected to invest $2 billion in Qayara, and that several firms have shown an interest in forging joint exploration partnerships with it. Paulino Jeronimo, exploration manager at Sonangol said "There are at least five companies that have approached us and showed an interest to work with us to invest. We are still holding talks with them. The companies are European and American."
Further investment in Diamond mines
Angola’s diamond mining concession company Endiama and De Beers joint prospecting company Endeb has invested US$107 million in diamond prospecting in Angola’s Luanda Norte province in the north east of the country since 2005. The project has so far discovered 108 diamond fields and is planned to continue until 2013. Escom Mining has announced that it is planning to invest a further US$750 million in diamond mining in Angola, by 2014, in addition to the US$430 million invested since 2001. The company is currently involved in several initiatives in the country including exploration and prospecting and expect to produce diamonds in the near future.
Angola is expected to adopt a new mining code in 2010 according to Minister of Geology and Mining Mankenda Ambroise. The Government have been drafting a new code since 2006 and will replace current mining legislation, which was adopted in 1992.
Economic growth of 8.7 per cent expected in 2010
A Reuters poll of 10 economists has predicted that Angola will see its economy grow by 8.7 per cent in 2010, slowing to 8.1 per cent in 2011. The estimates, which are largely based on the stabilisation of oil prices at a high level, are a massive increase from estimates of 1.3 per cent in 2009.
The economists also estimated that inflation rates were expected to remain high at 13 per cent before easing to 12.2 per cent. This was partly due to the low value of the Kwanza and structural difficulties effecting trade such as port congestion. Angola’s Economy Minister Manuel Nunes Junior had estimated in November that the economy would grow by 8.2 per cent in 2010. His prediction was due to an expansion of 15 per cent in the non oil sector with a growth of 1.1 per cent in the oil sector.
The predicted growth of the economy is reflected in Angola's 2010 budget which increases spending by 19 per cent. The budget is based on an increase in oil process from $37 per barrel predicted in the 2009 budget to $58 predicted for 2010. Social expenditure on health and education is the highest area of spending in the budget accounting for 28.1 per cent of expenditure.