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Angola Overview

    Context

    Economic Overview

    Angola’s economy appears to have gained momentum in 2014 with its gross domestic product (GDP) growing at 4.4% in 2014. Compared to other oil-rich countries in Sub-Saharan Africa oil revenue makes up a large share of Angola’s total revenues. For the first time since the 2009 crisis, Angola is estimated to have registered a fiscal deficit although much smaller than anticipated and mostly due to oil-price fluctuations. Such is a reminder of Angola sensitivity to oil-price shocks. The 2014 budget (adopted in 2013) is expansionary relative to 2013, with capital expenditures expected to increase by about 3 percentage points of GDP, to about 13% of GDP.  Thanks to expanded agricultural output, lower food imports, as well as efforts of the Angolan central bank to stabilize the nominal exchange rate, inflation has continuously declined to a single digit in 2014. The year-on-year rate of inflation slowed to a multi-decade low of 8.9% in January 2013, and further down to 7.69% in December 2013. However, as food imports are a major component of Angola’s consumption basket, consumer-price inflation is highly sensitive to changes in global food prices and the exchange rate. Inflationary risks are also linked to the planned fiscal expansion and the implementation of the new oil Foreign Exchange Law.

    Political Context

    Angola has maintained political stability since the end of the civil war. The Constitution adopted in February 2010 established a presidential parliamentary system. Under the new system, the 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.

    Parliamentary elections were held under the new Constitution in August 2012. The ruling party Movimento Popular de Libertação de Angola (MPLA) won 175 out of 220 seats in 2012, 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) established  six months before the elections, and Partido de Renovação Social (PRS) won eight and three seats respectively.

    Following the elections, the government vowed to operationalize the MPLA elections manifesto which seeks stronger growth and economic inclusion through better distribution of wealth, and by embedding it into the government’s National Development Plan (2013-2017), and its focus on poverty reduction, eradication of hunger, accelerated infrastructure development, assistance to young entrepreneurs, and better access to education and vocational training.

    The next general elections are scheduled for 2017. Until then the government of President Dos Santos seems to enjoy political stability. A handful of governmental and judicial appointments marked 2014, these include: a new Governor of Luanda (capital); a new Supreme Court President; and a new Minister of Defense in replacement of veteran Carlos Van-Dunem.

    Internationally, Angola is becoming more assertive and has been demonstrating steadfast commitment to peace and stability in Africa, in particular in the Great Lakes region. Ever since Angola took over the presidency of the International Conference of the Great Lakes Region in January, 2014 the situation in the region has improved significantly, clearly a result of Angola’s leadership. In this role Angola was able to secure for the first time a commitment from the states of the region to economic and political sanctions against armed rebel groups.

    Development Challenges

    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. 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 more inclusive development policies.

    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.

    World Bank Group (WBG) in Angola

    The WBG’s current partnership strategy (CPS) as set forth in the Angola CPS FY14-FY16, establishes the parameters through which the WBG and Angola collaborate. The CPS takes as its overarching theme the promotion of an inclusive growth with two core pillars and one foundation plank of cross-cutting nature, as follows:

    • The first pillar focuses on supporting integrated national economic diversification by revitalizing rural economies toward greater competitiveness and employment. The target being strengthening of the non-oil economy, with emphasis on recuperating traditional lines of business that suffered greatly during the war, as well as providing technical assistance for the energy sector;
    • The second pillar aims at enhancing the quality of service delivery to improve the quality of life of the population and equip them to take greater role in the development of the country and instituting a strong social protection program; and 
    • The Foundation Plank of the strategy revolves around building human and institutional capacity to approach levels common in middle-income countries.

    These objectives would be achieved during the CPS period through stronger attention to quality and implementation performance enhancements in the five existing projects, as well as through the expected build-up of a series of Reimbursable Advisory Services (RAS) and International Bank for Reconstruction and Development (IBRD) lending.

    Portfolio

    The current WBG portfolio is comprised of five International Development Association (IDA) funded investment projects with a total net commitment of $426 million dollars. These include:

    Last Updated: Oct 10, 2014

    LENDING
    Angola: Commitments by Fiscal Year (in millions of dollars)*
    *Amounts include IBRD and IDA commitments
    Strategy

    World Bank Assistance to Angola

    The World Bank’s current assistance strategy as set forth in its Country Partnership Strategy (CPS) for the period FY14-FY16, establishes the parameters through which the World Bank and Angola collaborate. The CPS takes as its overarching theme the promotion of an inclusive growth with two core pillars and one foundation plank of cross-cutting nature, as follows: 

    • The First Pillar focuses on supporting integrated national economic diversification by revitalizing rural economies toward greater competitiveness and employment. The target being strengthening of the non-oil economy, with emphasis on recuperating traditional lines of business that suffered greatly during the war, as well as providing technical assistance for the energy sector;
    • The Second Pillar aims at enhancing the quality of service delivery to improve the quality of life of the population and equip them to take greater role in the development of the country and instituting a strong social protection program; and  
    • The Foundation Plank of the strategy revolves around building human and institutional capacity to approach levels common in middle-income countries.

    These objectives would be achieved during the CPS period through stronger attention to quality and implementation performance enhancements in the five existing projects, as well as through the expected build-up of a series of Reimbursable Advisory Services (RAS) and International Bank for Reconstruction and Development (IBRD) lending.

    Portfolio

    The current World Bank portfolio is comprised of five International Development Association (IDA) funded investment projects with a total net commitment of $426 million dollars. These include:

    Last Updated: Oct 10, 2014

    LENDING
    Angola: Commitments by Fiscal Year (in millions of dollars)*
    *Amounts include IBRD and IDA commitments
    Results

    Improved service delivery to the poor – Governance was one of the key pillars of the World Bank Group’s (WBG) Interim Strategy Note (ISN) that ended in June 2009 and will continue to be emphasized in the current Country Partnership Strategy (CPS) approved in September 2013 by the Board. 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 WBG 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 WBG 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.

    Strengthening public sector management – To support government’s efforts to improve macroeconomic stability, the WBG 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.

    The WBG continues to leverage its support by working closely with other key stakeholders. Such entails closer collaboration with other donors, the private sector, civil society organizations (CSOs), academia and think tanks. Some of the institution’s traditional partners include UN agencies (UNDP, UNICEF), development partners (European Commission, USAID) as well as the oil sector companies on innovative cooperation opportunities.

    Last Updated: Oct 10, 2014

    LENDING
    Angola: Commitments by Fiscal Year (in millions of dollars)*
    *Amounts include IBRD and IDA commitments
    Partners

    The World Bank continues to leverage its support by working closely with other key stakeholders. Such entails closer collaboration with other donors, the private sector, civil society organizations (CSOs), academia and think tanks. Some of the institution’s traditional partners include UN agencies (UNDP, UNICEF), development partners (European Commission, USAID) as well as the oil sector companies on innovative cooperation opportunities.

    Last Updated: Oct 10, 2014

Country Office Contacts
Main Office Contact
+258-21-482-300

Rafael Saute
Sr. Communications Officer
+258-21-482-944

Av. Kenneth Kaunda, 1224
Maputo, Mozambique

rsaute@worldbank.org
In Washington:
Olivier Godron
Country Program Coordinator
+1-202-473-9626

1818 H Street, NW
Washington, DC 20433

ogodron@worldbank.org