Angola’s economy is rebounding after a period of relatively weak growth, with gross domestic product (GDP) expanding by an estimated 8.1% in 2012. From 2009 to mid-2011 GDP growth stagnated due to a decline in global oil prices and a slowdown in domestic oil production. The resulting drop in oil revenues, the primary source of government revenue, impacted the non-oil economy through diminished private consumption, cuts to public spending and the accumulation of substantial arrears to domestic firms, particularly in the construction sector. By 2012, however, a combination of high oil prices and rising production boosted GDP growth and generated a large increase in fiscal revenues, enabling the government to clear its arrears and increase public expenditures.
In 2012 the government’s fiscal position strengthened, inflation declined to single digits, and international reserves continued to accumulate. The recovery of the oil sector allowed the government to boost public spending while maintaining a strong overall fiscal surplus, which is estimated at 8.6% of GDP. Inflation fell to 9%, the lowest rate in more than two decades, due to declining global food prices and the efforts of the Angolan Central Bank (Banco Nacional de Angola—BNA) to stabilize the nominal exchange rate. In the external sector, strong export earnings and foreign direct investment (FDI) inflows bolstered aggregate demand, leading to a rise in imports and a moderate decrease in the current account surplus, now estimated at 6.7% of GDP. Solid net capital inflows allowed Angola to increase its international reserves to the equivalent of 7.4 months of imports, two-and-a-half times their 2009 level.
There are significant challenges remaining to lift Angola’s development effort to a higher plane. Despite the rapid growth, particularly fueled by the development of Angola’s oil and gas sector, large pockets of the population still remain in poverty and without adequate access to basic services. Taking into account Angola’s high population growth rate and existing income, and service access disparity across different regions, there is a clear need for a more inclusive development policy.
Angola has maintained political stability since the end of the civil war. The new Constitution adopted in February 2010 established a presidential parliamentary system. Under the new system, President is no longer elected by direct popular vote, but instead the head of the party winning the most seats in Parliament becomes President. The 2010 Constitution sets a limit of two five-year presidential terms effective from the 2012 election.
Parliamentary elections were held under the new Constitution in August 2012. Movimento Popular de Libertação de Angola (MPLA) won 175 out of 220 seats, receiving over 72% of the votes. As a result, the incumbent Jose Eduardo dos Santos was sworn in as President together with Vice President Manuel Vicente, former head of the state oil company, Sonangol a month later. União Nacional para a Independência Total de Angola (UNITA) is the main opposition party with 32 parliamentary seats, while Convergência Ampla de Salvação de Angola (CASA-CE) created just six months before the elections, and Partido de Renovação Social (PRS) won eight and three seats respectively.
Following the elections, the newly constituted government worked quickly to operationalize the MPLA elections manifesto “enhancing growth and distributing better” into National Development Plan, 2013-2017 which focuses on poverty reduction, eradication of hunger, accelerated infrastructure development, assistance to young entrepreneurs, and better access to education and vocational training.
The prospects for rule of law and peace are good. Progress is being made in ending armed conflict in the country, including in the oil-rich province of Cabinda where the Armed Cabinda separatists Frente de Libertação do Enclave de Cabinda (FLEC) have fought for independence since 1975. A Memorandum of Understanding (MOU) was signed between the government and a faction of FLEC in 2006 seeking to bring a formal end to the conflict. However, sporadic attacks on government and other members of the society are still common.
Angola has made substantial progress in economic and political terms since the end of the war. However, the country continues to face massive developmental challenges which include reducing the dependency on oil and diversifying the economy, rebuilding its infrastructure, improving institutional capacity, governance, public financial management systems, human development indicators and the living conditions of the population.
As a resource-rich developing country, Angola’s fiscal policies are essential to its medium-term growth. Effective fiscal policies can stabilize the economy against external shocks, and public investment, especially in infrastructure, is a primary mechanism for transforming the revenues of the resource sector into valuable public goods capable of supporting economic diversification and inclusive growth. While the authorities have taken steps to improve the resilience of the economy since the onset of the global financial crisis, there remains considerable scope to strengthen fiscal policy. Angola’s level of public investment is very low in comparison to other countries in the region, and at present current expenditures—including energy subsidies—account for the majority of public spending. Angola’s strong public debt profile and the revenue boost provided by the recovery of the oil sector offer a valuable opportunity to expand development spending and attract greater private-sector investment in the non-oil economy. However, in order to maximize its impact, new public spending must be efficient and productive. Sound fiscal rules and strong public investment management systems are essential to ensuring high-quality fiscal policy.
Recent reforms to curtail quasi-fiscal operations by Sonangol and to increase the transparency of oil-revenue management are positive steps. Angola’s recently established Sovereign Wealth Fund (SWF) can strengthen the country’s macroeconomic stability by isolating oil revenues and minimizing their inherent volatility, but its mandate and governing framework have yet to be defined in detail.
Last updated September 2013
World Bank Assistance to Angola
Angola joined the World Bank Group (WBG) in 1989, and assistance began in 1991 with a credit from the World Bank's International Development Association (IDA) for economic management capacity building. The World Bank established a Country Office in Luanda from which country dialogue and project oversight take place. The World Bank works closely with the International Monetary Fund (IMF), United Nations Agencies, development partners, and civil society (academia, non-governmental organizations (NGOs), think tanks and community-based organizations (CBOs) through the country office.
The World Bank has invested about $1 billion dollars in Angola to date. With the government’s input, the World Bank has finalized the preparation of the Country Partnership Strategy (CPS) for its cooperation with the Angola government for the next three to four years. This strategy will build upon previous programs and strategies between the country and the Bank within Angola’s framework of intervention for poverty reduction and the National Development Plan and Strategy 2025.
The new CPS will place a much stronger emphasis on knowledge, with a relatively lower priority on direct financial support. A greater use of WBG’s knowledge services, including Technical Assistance and, Reimbursable Advisory Services, seminars and workshops, and other South-South exchanges, are deemed key in Angola’s current economic juncture. The CPS takes into account the promotion of a more inclusive development, with two core objectives constituting Pillars, and one Foundation Plank of cross-cutting nature. The First Pillar focuses on supporting integrated national economic diversification by revitalizing rural economies toward greater competitiveness and employment. The focus will be on the strengthening of the non-oil economy, with emphasis on recuperating traditional lines of business that suffered greatly during the war, as well as the technical assistance for the energy sector. The focus of the Second Pillar will be on enhancing the quality of service delivery to improve the quality of life of the population and equip them to take a greater role in the development of the country and instituting a strong social protection program. Lastly, the Foundation Plank of the CPS will revolve around building human and institutional capacity approaching the levels common in the middle-income countries, complementing the two strategic Pillars.
The current World Bank’s active portfolio comprises four investment projects representing a total amount of committed credits and grants of US$351.0.5 million dollars from IDA and one on the pipeline as follows:
Learning for All Project – (US$75 million dollars credit)
In addition to IDA support, Angola receives support from the International Finance Corporation’s (IFC) and the Multilateral Investment Guarantee Agency (MIGA) that is helping Angola address its severe energy deficit through its support for the expansion of the Cambambe hydroelectric power plant. MIGA is providing non-honoring of sovereign financial obligations cover of US$512 million to the project’s lenders for a period of 13 years. IFC’s business lines include Investment Services, Advisory Services, and Asset Management. MIGA provides noncommercial risk guarantees for private investments.
The World Bank has concluded the preparation of its Country Partnership Strategy (CPS) 2014-2016 and under such a strategy, the Bank will continue to leverage its support by working closely with other key stakeholders, beyond the financial support. This will require closer collaboration with other donors, the private sector, civil society organizations (CSOs), academia and think tanks.
The World Bank continues to work in partnership with the UN Agencies (UNDP, UNICEF), and other development partners (European Commission, USAID) as well as the sector oil companies on innovative cooperation opportunities.
Last updated September 2013
Improved service delivery to the poor
Governance was one of the key pillars of the Bank’s Interim Strategy Note (ISN) that ended in June 2009 and will continue to be emphasized in the next Country Partnership Strategy currently under preparation. The Angolan government continues to recognize the importance of the involvement of community members and local organizations in the country’s development and has formulated policies and programs to encourage such approach to development. The process towards decentralization gained momentum in Angola between 2007 and 2008, when the government of Angola advanced in terms of strategy, policy and legal framework through the adoption of key instruments with the intention of building the foundation for creating devolved, elected local governments.
The Angola Social Action Fund, commonly known as “Fundo de Apoio Social (FAS)” has been the main World Bank support program which contributes toward decentralization. The project, which has improved poor communities’ access to basic social and economic infrastructure and provision of services, has been in implementation in various phases since 1994. The project, now called the Local Development Project (PDL) is in its fourth phase, and has been considered as the largest bottom-up poverty reduction program in Angola. It provides direct financial support and capacity development assistance to poor communities complementing government’s efforts in the construction and rehabilitation and decentralization processes.
During the third phase of the project, 1,575 pieces of community infrastructure were constructed and rehabilitated in all 18 provinces of the country enabling about 2.3 million Angolans to gain access to basic social and economic services. Mechanisms and practices for participatory governance systems have been established, in which local governments are increasingly more accountable to their constituencies and about 7,200 individuals benefited from its capacity development activities, half of whom (3,108) received formal training. The fourth phase of the project, which began implementation in August 2011, consists of interlocking and complementary components:
The first component aims to increase access to improve social and economic infrastructures for poor households by financing the rehabilitation and construction of basic public works and the acquisition of essential goods in response to local development plans and through municipal grants.
The second component aims to improve business development skills and participation in markets of selected producer groups by providing a combination of technical assistance to selected municipalities to prepare their municipal economic development strategies, technical assistance to participating provinces to conduct sector and value chain studies, technical assistance and training for FAS to prepare and implement the matching grants manual, provide matching grants to selected producer groups and business development service providers, technical assistance and training to producer groups and business development service providers on business skills, managements, and marketing and organization of workshops on microfinance.
The third component aims to strengthen the capacities of public entities and civil society to be inducted in the participatory planning, management, and monitoring of basic public service delivery and expenditure management.
Social inclusion and poverty reduction
The Bank supported the demobilization and reintegration program of the Angolan government through the Multi Donor Reintegration Program (MDRP) in 2002, when the country had just ended the long civil war. This was a fundamental exercise for the country to achieve its political stability after the peace agreement was signed. The MDRP was a multi-agency effort that contributed to the demobilization and reintegration of ex-combatants in the greater Great Lakes region of Central Africa.
The Angola Demobilization and Reintegration Project (ADRP) helped to consolidate economic stability by demobilizing an estimated number of 105,000 ex-UNITA soldiers, supported their reinsertion into civilian life, and facilitated the reallocations of government expenditure from military to social and economic sectors. At the end of the project implementation, 61% of ex-combatants were self-employed, 35% were unemployed, 4% were formally employed, 9% had access to agriculture land, 98% had established families and 93% considered themselves reintegrated into their communities of destination. Another 92,297 direct and indirect beneficiaries had completed reintegration activities. More than 260 sub-projects had been contracted in close collaboration with community based organizations and NGOs.
Due to good results achieved with the implementation of the ADRP the Angolan government is financing a follow-up program to support the social and economic reintegration of ex-combatants in several provinces.
Strengthening public sector management
To support government’s efforts to improve macroeconomic stability, the Bank financed the Economic Management and Technical Assistance (EMTA) project. The main objective of the project was to strengthen the government's capacity to formulate sound analysis and to implement sound policies in areas which were critical to the design and implementation of its poverty reduction strategy, as well as the medium-term planning including the establishment of a more transparent and efficient public finance framework. Major results included the modernization of payment systems, such as the Real Time Gross Settlement (RTGS) availability which is now above 99% with continued increase in number of transactions and amounts. Increased retail services as the number of cards, Automated Teller Machines (ATMs) and Point of Sales (POS) grew: 685,000 cards; 486 ATMs, 850 POS. The RTGS system is facilitating a large value inter-bank payment and settlement in real time online mode on a transaction by transaction basis.
Another major result is the Household Expenditure Survey, also known as Inquérito do Bem Estar da População (IBEP) co-financed by the Bank and UNICEF, conducted in 2008 and 2009 across all 18 provinces and whose results were recently published by the Ministry of Planning. The survey indicates, amongst other, that approximately 37% of the population lives below the poverty line, with 58.3% in rural areas and 18.7% in urban areas.