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Africa’s second-largest oil producer Angola is seeking non-financial assistance from the International Monetary Fund (IMF) to help it with reforms aimed at revitalizing the economy that has suffered from low oil prices.
OPEC member Angola has requested an agreement, known as a Policy Coordination Instrument, to help it implement a macroeconomic plan of the new Angolan government, the African country’s finance ministry said on Tuesday.
The agreement with the IMF “will help to improve the external credibility of our country with positive impact on the ability to attract Foreign Direct Investment,” the finance ministry’s statement reads.
Angola’s new president João Lourenço—who succeeded in September José Eduardo dos Santos at the end of his 38-year-long rule—has vowed to turn around the economy and open it to foreign investment to diversify away from oil, which currently makes up 90 percent of the country’s export revenues.
Last month, the IMF said after completing a mission to Angola:
“The Angolan economy is experiencing a mild economic recovery. The new administration is rightly focused on restoring macroeconomic stability and improving governance. Also, the more benign outlook for oil prices opens a window of opportunity to strengthen macroeconomic policies and give new impetus to structural reforms, allowing Angola to realize its full potential.”
Related: Oil Prices Rise On Crude, Gasoline Inventory Draw
Earlier this year, Angola ditched its currency peg to the U.S. dollar to try to offset the decline in its foreign currency reserves, allowing a more flexible exchange rate regime with the currency trading within a band.
The foreign reserves crunch and the current lack of investments in Angola’s oil industry threatens to reduce the country’s production as oil fields are maturing, the International Energy Agency warned in its Oil 2018 report in March. Without measures to stimulate new investment, Angola’s oil production capacity will drop to just 1.29 million bpd over the next five years.
OPEC’s Monthly Oil Market Report last week showed that Angola experienced the biggest monthly decline in oil production in March, by 81,700 bpd to 1.524 million bpd—the lowest level in nearly seven years. The decline in Angola was even bigger than the 55,300 bpd drop in Venezuela. To compare, Angola is allowed to pump up to 1.673 million bpd under the OPEC deal.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.