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Africa’s second-largest oil exporter Angola has received approval from the International Monetary Fund for a disbursement of over $480 million under a $3.7-billion loan agreement as it continues to struggle with low oil prices and weak exports.
Reuters quoted the international lender as praising for its “robust” response to the twin challenge of low oil prices and the coronavirus pandemic, noting that the Angolan authorities “remain resolutely committed to the program.”
The West African country last year unveiled a new investment strategy aiming to ramp up its oil production, despite the pandemic, seeking to tap as much as 57 billion barrels in undiscovered oil reserves.
Angola’s oil production has been declining since 2008, when it hit a peak of close to 2 million bpd. Last year’s average production rate has been forecast at 1.28 million bpd, set to decline further due to the natural depletion of the country’s oilfields.
This will drop to barely over 500,000 bpd unless new discoveries are made, for which Angola needs investments from foreign industry players.
Yet investments will be hard to come by as the oil industry shrank its exploration—and production—budgets in response to the pandemic, which sent oil prices spiraling down.
Benchmarks have improved in recent weeks on the back of optimistic vaccine data and a declaration by Saudi Arabia that will unilaterally implement an additional 1-million-bpd reduction in its crude oil production. However, for a country as dependent on its oil revenues as Angola is, this is not enough in the face of naturally declining production.
Clearly aware of this, the Angolan government has pledged to boost non-oil revenues, which was one reason why the IMF approved the next tranche for the country.
“The authorities achieved strong fiscal adjustment in 2020. Their 2021 budget consolidates the non-oil revenue gains and expenditure restraint of the 2020 budget, while protecting priority health and social spending,” Antoinette Sayeh, IMF Deputy Managing Director, said.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.