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Best Bitcoin Card for Angola

Booming country of the continent

Angola is an economically rich country with large natural resources (oil, diamonds, minerals, agriculture and fisheries). However, even after the end of the civil war, its economy is still largely dependent on oil, although it has diversified in recent years. Strongly rising oil prices caused government revenues to grow for years and between 2005 and 2008 provided for economic growth of over 20 percent, making Angola one of the fastest growing economies in the world as a booming country on the continent. Since the price of oil has fallen on the world market, revenues have been declining. Economic growth has levelled off at less than three percent since 2015. A blatant lack of good governance has so far largely prevented oil revenues from benefiting the population. But the oil wealth in the “Dubai of Africa” is increasingly arousing foreign desires, in whose competition China is also playing a major role.

Economic indicators

The information provided by Germany Trade and Invest (gtai) provides a compact overview of the economic situation, economic trends and product markets. The World Bank study Angola Economic Update of July 2014 provides a detailed outlook on economic development and the investment climate in Angola. Due to the importance of the Angolan economy, the World Bank intends to continue these economic updates. Detailed economic indicators of the IMF on Angola are listed on the page Trading Economics.

A 2004 report by the Friedrich-Ebert-Stiftung (FES) shows the challenges facing Angola’s economy after the end of the war and civil war. The Bertelsmann Foundation’s Transformation Index assesses the current state of the Angolan government’s economic policy.

According to the Doing Business Report of the World Bank, Angola has improved slightly compared to the previous year and ranks 175th out of 190 countries in 2018. Other risk assessments such as Global Edge’s Risk Assessment also see an extremely difficult economic environment and an uncertain investment climate. Nevertheless, thanks to the oil sector, Angola has the highest inflow of foreign direct investment in Africa. Individual studies on different industry sectors can be downloaded (after registration) from Business Monitor International. The Michelsen Institute CMI from Norway maintains a research programme on Angola, which publishes various studies on the country’s economy.

In July 2014, an IMF mission in Luanda assessed the economic situation as satisfactory. Oil revenues must be used carefully, inflation must be further reduced and banks tightly controlled. But the fall in oil prices has plunged the economy into a severe crisis. Real economic growth was 3.8 percent in 2015. According to the African Economic Outlook 2016, due to the drop in oil prices, it fell to 1.1 percent in 2016, and it is questionable whether the 3.2 percent forecast for 2018 will be reached despite rising oil prices again.

Angola’s debt has risen to such an extent that it now accounts for 60 percent of GDP – “high, but not worrying” for the IMF. Nevertheless, Angola depends on the support of the IMF to stabilize its economy, according to economic experts, especially since national reserves fell by 36 percent year-on-year to 13.3 billion US dollars at the end of 2017.

Economic policy

Angola is formally committed to a market economy. In 1987, after unsuccessful socialist attempts, the government introduced the first tentative liberal reforms. It demonstrated its willingness to reform in recent years before the fall in oil prices put a spoke in its wheel. Inflation was combated and the exchange rate kept stable. In addition, foreign trade was liberalized by abolishing import licenses and simplifying the customs system, and a cautious privatization policy was introduced. With a thorough tax reform, the government intends to increase revenues from the non-oil sector to 20 percent of GDP by 2017 (from 6.7 percent in 2012). This is intended to accelerate the diversification of the economy and reduce dependence on oil.

However, due to the dramatic fall in oil prices on the world market at the end of 2014 and again at the end of 2015, the government had to correct its last budgets and cut spending for 2016 by 25 percent, which led to a certain nervousness in the Ministry of Finance. For analysts, the measures introduced were rather “recipes with a guarantee of expiry” (original text). In fact, the budget situation has deteriorated further since then. Even a loan of USD 25 billion agreed with China in June 2015 could not prevent Angola from being virtually bankrupt at the beginning of 2016. The government sought help from international financial institutions and donor states. An emergency loan of USD 4.5 billion, repayable within ten years, was negotiated with the International Monetary Fund (IMF). In July 2016, however, the government broke off negotiations with the IMF in Washington because it did not want to fulfil the conditions of the IMF programme, which would apply for the next three years. Economic experts have criticized Luanda for this “unwise decision”.

The government’s lack of foresight in its economic policy has led to an end to the oil bonanza. Angola is facing insolvency. The Angola Current Affairs Newsletter of the Angola Round deals with the current economic crisis in a special issue.

The IMF had already granted Angola a stand-by loan of USD 1.4 billion in 2009. The planned “de-dollarisation” of the oil sector through mandatory payment transactions via Angolan banks and in the national currency Kwanza, as well as concrete plans to open an international stock exchange in Luanda, show the government’s ambitions to make Luanda an international financial centre.

Angola’s new president João Lourenço wants to reform the economy and free it from the stagnation of 2016. Despite all the reform measures that have been introduced, the structural problem of the Angolan economy remains: A rentier economy dependent on mineral resources characterizes the economic order at the expense of agriculture, which dominated before independence and suffered considerably during the civil war years. In other words, oil wealth will pass the rural poor by as long as revenues are not invested in the development of sustainable agriculture, in which the majority still live from subsistence agriculture. The government’s regional development plan, which is intended to counteract urbanization by providing incentives for agricultural production, was also viewed rather sceptically by civil society.