Chris Gordon
The Angolan government published its accounts for the first time in April, revealing that it has no foreign exchange reserves.
While the short-term financial position has been improved by an oil-backed loan and signing fees from new deep-water exploration areas, the longer-term position depends now on Angola’s relations to the major international financial institutions.
With a major dry season offensive against the rebel Unita forces planned, and most of its budget committed to defence expenditure, the Angolan government stated in the preamble to its budget: “Angola’s access to external financing is almost at its limit.”
Two shorter-term measures have resolved the immediate crisis. Angola secured a $575- million loan for four years from the investment banking division of the United Bank of Switzerland, Warburg Dillon Read. The loan was guaranteed by an oil contract between Sonangol and British Petroleum.
Part of it will be used to repay loans taken when the price of oil was about $19 per barrel. The fall in oil prices has led to repayment difficulties. Economists say most of Angola’s 780 000-barrel-a-day offshore oil production is now being used to pay back previous loans, often in the form of crude oil.
But with oil revenues now fully committed to war expenditure, the only further boost due to the treasury is the signing fees of $900- million for three deep-water oil blocks, agreed to about three weeks ago.
The gloomy picture is brightened a bit by an increase in oil prices to $15 a barrel from $9. But in the longer term Angola needs financial backing from the international community, and it has taken some dramatic steps to begin to repair its fractured relationship with the International Monetary Fund and the World Bank.
Last month, the World Bank announced it would stop further lending to Angola unless economic reforms were implemented, including controlling corruption and transparency in the oil and diamond accounts. These have been key features in the negotiations between the government and the World Bank over several years.
Unita’s strategy is to target the economy and bring down the government by creating a total breakdown, say observers in Luanda. New investment in Angola is declining as the war takes hold, and the economy is becoming paralysed yet again.
A new economic team, put in place at the beginning of this year, has begun to implement some of the actions wanted by Bretton Woods institutions.
A week ago, the government took two major steps. It effectively devalued the kwanzas held in the banking system by setting the official exchange rate at the same rate as the parallel market, an incredible two million kwanza to the dollar. The official rate had been 760 000 to the dollar.
The government also cracked down on how diamond companies imported money into Angola. The governor of the National Bank of Angola, Aguinaldo Jaime, banned mining companies from depositing revenue earned from diamond sales in foreign banks and said all transactions must be conducted through the banking system.
The government is aiming to maximise its income from the diamond sector to pay for its weapons imports. A commission was ordered to investigate and stop the leakage of diamonds and money from the diamond parastatal, Endiama. No estimate is available yet for the value of diverted revenues and stolen diamonds.
The question is whether Minister of Finance Joaquim David can take the process further and create much more accountability and transparency in the economy. He has until September, when the International Monetary Fund will reconsider Angola’s position. By then the dry season – the season of war and diamond digging – will be almost over and the government’s position will be clear.