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Angola’s government has cut its economic growth projections for 2016 by almost half, to 1.3 percent from 3.3 percent, Reuters reported, citing the country’s finance ministry. Government spending will also be significantly reduced, to US$24 billion from US$30 billion previously.
The main reason for these significant government spending cuts has been the oil price slump which has taken a seriously toll on Africa’s largest oil exporter. Thanks to these oil price movements, budget revenue projections for Angola were also reduced, to US$18 billion, down from US$24.4 billion in the initial 2016 budget. Oil revenues account for some 95 percent of the country’s total export earnings.
Last month the International Monetary Fund offered the African country a loan of US$4.5 billion, but the Angolan side soon put an end to the negotiations, deciding to go it alone. Following the end of the negotiations, Fitch issued a warning, saying there are risks for the country’s “external financing position” if no other organization or government comes forward ready to offer financial support.
Angola’s state-owned oil company Sonangol has been the focus of much talk about reforms, including the division of core and non-core assets and possible asset sales under its new CEO Isabel dos Santos, daughter of President Jose Eduardo do Santos. A few days ago, however, Sonangol’s chief reportedly suspended all asset sale talks and stripped the company’s internal legal department of most of its powers.
When Dos Santos took the helm of Sonangol, she pledged to make the company transparent and separate its core operations, spinning off the rest, to improve focus. The Angolan state company is, like others like it (Nigeria’s NNPC springs to mind), extremely opaque, and plagued by accusations of fund mishandling. Five years ago, Sonangol was accused of “misplacing” US$32 billion in government oil revenues.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.