Last Updated- Nov 24, 2009 11:56 - - 0 Comments


IMF approves $1.4b standby credit line for Angola

imfAngola received approval from the International Monetary Fund for a $1.4 billion loan to help one of Africa’s largest oil producers manage through the global economic crisis, the IMF said.

The 27-month standby arrangement backed by the Washington- based IMF’s board of directors yesterday will help Angola rebuild international reserves and repair trade and budget balances, the fund said in an e-mailed statement. It’s the second-biggest loan on record to a sub-Saharan country, according to the institution.

Angola has suffered a “significant” shock to its economy because of the “sharp decline in oil prices,” the statement said. Falling oil revenue “caused a sharp slowdown in the economy, weakening of fiscal and external positions, depreciation of the exchange rate, and a rise in inflation,” it said.

Angola, which vies with Nigeria to be Africa’s biggest oil producer, sought the assistance to plug a gap in its public finances caused by the slump in oil prices from last year’s record high.

Under the set of policies tied to the loan, Angola will seek to reduce its non-oil fiscal deficit “significantly” in 2010, while maintaining enough resources for social spending and “vital infrastructure projects,” the IMF said.

Exchange Rate

Another condition of the IMF-supported program is “an orderly exchange-rate adjustment backed by tight monetary policy to normalize conditions in the foreign-exchange market” as well as “measures to safeguard the financial sector,” according to the statement.

IMF Deputy Managing Director and Acting Chairman Takatoshi Kato welcomed Angola’s plan to create a sovereign wealth fund and to resume foreign-exchange auctions. He called it “essential” to accept “further improvement of the exchange rate.”

The southwest African nation, a member of the Organization of Petroleum Exporting Countries, finances about 80 percent of its budget from oil revenue and has cut spending by more than a quarter this year.

Oil futures prices that reached $77.45 a barrel yesterday are almost half of what they were in July 2008.

Source: Bloomberg

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