Research documents and analysis

1-The International Monetary Fund’s report on Angola (Feb.2025)

None of the IMF’s various interventions in Angola have succeeded in changing the country’s economic structure and helping to launch it on a path of development, demonstrating the fragility of the IMF’s models of action in Africa.[1]

When the IMF comes up with equivocal results, it uses ambiguous communiqués that allow for different interpretations and, of course, disempower the institution. This is the case with the organization’s most recent statement on Angola, which is a real exercise in ambivalence.

However, despite this, or above all because of it, this communiqué[2] is a valuable tool from which to draw some conclusions and clues for the future of the Angolan economy, essentially the need for effective and real acceleration of economic reform in the direction of competition, productivity and radical modification of the financial functioning of the state.

On February 24, 2025, the Executive Board of the International Monetary Fund (IMF) concluded its Article IV consultation on Angola. It then issued a communiqué, which has now been made public.

 On a positive note, the IMF points out that Angola’s economy recovered in 2024, mainly due to the oil sector. GDP growth is estimated to have reached 3.8 percent, exceeding previous projections, although this growth has been extended to the non-oil sector. The public debt/GDP ratio fell in 2024, benefiting from higher nominal GDP growth and sustained primary fiscal surpluses. This is the good news: the economy is growing due to the oil sector, while at the same time having a spill over effect on the other sectors.

Fig. 1- Evolution of Angola’s real economy as a percentage. Source: IMF 2025

At the same time, the IMF is cautious and somewhat frightened by a number of problems:

-General State Budget (public accounts) slippage due to higher capital expenditure and delay in removing the fuel subsidy.

-High inflation due to exchange rate pressures and food prices.

-Adverse market expectations and a high external debt service put great pressure on the value of the Angolan currency.

Due to the imminent dangers, the IMF “invites” the Angolan Executive to accelerate structural reforms of the economy, in which it emphasizes fiscal consolidation (cutting public spending or increasing taxes), the withdrawal of fuel subsidies, rationalizing public investment and improving the efficiency of spending, strengthening the management of public finances, including the public procurement framework and reforms of public companies. It also reaffirms the need for monetary policy to maintain a restrictive bias to ensure lasting disinflation.

The main emphasis, according to the IMF, should be on pro-market policies aimed at simplifying business regulation, strengthening governance, fighting corruption, developing human capital and deepening financial inclusion. Greater statistical capacity is also needed to support sound policymaking.

2-Beyond the IMF. The necessary reforms

The IMF communiqué itself contains contradictions that show its difficulty in obtaining a realistic view of the Angolan economy. For example, it attributes inflation to the liberalization of the exchange rate and the rise in food prices. Let’s remember that it was the IMF that recommended the abrupt adoption of a totally flexible exchange rate, without noticing that a good part of Angolan food was imported…so it’s an IMF policy that according to the IMF itself generates inflation….

However, further down he talks about the need for a restrictive monetary policy, which is obviously Angola’s major problem and the ultimate source of all inflation, the lax attitude of the BNA which lives with negative reference interest rates in real terms (BNA reference interest rate, 19.5% for inflation of 26.48%) and has difficulties controlling the money supply .[3]

Fig. 2-Development of monetary aggregates as a percentage/end of period. Source: IMF, 2025

Also surprising is the obsession with fuel subsidies, since it is clear that withdrawing them will generate even stronger inflationary pressures and possible social upheaval.

Even the warning about budget slippage seems out of context. If you look, the balance for Angola’s General State Budget (GSB) for 2025 is -1.3% of GDP, nothing significant. In fact, Angola doesn’t need less spending or austerity; on the contrary, it needs more effective spending.

Fig. nº 3- Overall Budget Balance, percentage of GDP. Source: IMF, 2025

The problems of the Angolan economy do not lie along these lines, but along others that the IMF also addresses, but does not highlight.

• The first problem facing the Angolan economy is that of rationalizing public spending. Much of the expenditure is uncontrolled, its destination is unknown, it is the result of over-invoicing, corrupt schemes, endogenous bargaining[4] . Much more than in the United States of America, it is in Angola that a programme like that of Elon Musk and his DOGE (Department of Government Efficiency) would be essential in order to reduce bureaucracy and optimize Angola’s public machine by cutting phantom and invented spending and reformulating government agencies.
• In terms of public procurement, it is essential to introduce competition mechanisms. If, perhaps, public tendering is time-consuming and an obstacle to development, allow simplified contracting, but with competition, perhaps through auctions or electronic mechanisms, thoroughly reviewing the current contracting law, which is bureaucratic, slow and unenforceable.
• Another important aspect is the renegotiation of the foreign debt. You can’t keep paying billions in capital every year, with the opportunity cost being Angolan development. Paying off the foreign debt under the terms in which it is being paid is an obstacle to the country’s growth.
• Domestically, the private economy needs to be stimulated, creating the pro-market conditions that the IMF talks about, with a major effort to reduce bureaucracy, freedom to set up companies, boosting bank credit, depoliticizing the business community and some protectionism for Angola’s infant industries. An internal free market with external protection must be the recipe for the initial years.
• We also need to understand the profitability of the large state-owned companies, Sonangol, TAAG, among others, by promoting efficiency in their management and privatizing at least 1/3 of their capital

Even now, Sonangol’s current income statement presents more doubts than certainties: Sonangol ended 2024 with a debt of 4.5 billion dollars, representing an increase of 15.4% on the previous year. At the same time, revenues fell to 10 billion euros last year, a drop of 8.6% in the space of a year. EBITDA (earnings before interest, taxes, depreciation and amortization) also fell by 8.8% year-on-year to 3.2 billion euros[5] . Let’s be clear, these results are not good. It’s not the catastrophe of 2015, but it’s not very encouraging.

 The efficiency of companies can be optimized through partial privatization, since management with private partners tends to be more agile and focused on results, possibly encouraging innovation in mixed companies. The introduction of competing visions (state and private) can lead to cost savings and the elimination of unnecessary bureaucracy. Similarly, selling off parts of state-owned companies can generate revenue for the government, easing budget constraints and reducing the need for public funding. Partial privatization can lead to improvements in the quality of services, as private entities focus on customer satisfaction. Finally, mixed companies will have greater flexibility to adapt quickly to market demands.

Essentially:

1. The state’s financial function will have to be completely restructured, in terms of spending, debt and hiring, possibly by creating an efficiency department like Elon Musk’s in the US.
2. Introducing a free market in Angola with perfect independence for entrepreneurs to create and manage their companies without bureaucracy and interference from the state and the creation of mechanisms to bring them capital (banks, stock exchanges, venture capital, funds and autonomous state partnerships).
3. Privatize up to 1/3 of the capital of large state-owned companies, including Sonangol.

All these reforms should be speeded up in the two and a half years that remain before President João Lourenço finishes his term in office.

[1] Cfr. https://actionaid.

[2] See https://www.imf.org/en/Ne

[3] https://www.makaangola.org/2024/03/bna-o-culpado-da-inflacao-em-angola/

[4] A recent example of pure waste: https://www.makaangola.org/2025/02/os-consumiveis-do-saque-no-kuando-kubango/

[5] https://www.jornaldenegocios.pt/economia/mundo/africa/detalhe/sonangol-ve-divida-aumentar-para-43-mil-milhoes-em-2024