On 21 September 2020 the IMF published a staff report on Angola in connection with the third review under an extended arrangement under the IMF’s extended fund facility.

Angola’s economy has been hit in 2020 by the economic and health crisis in the pandemic and by the decline in oil prices. The downturn and social distancing measures have hit the economy and especially the informal sector. The government has taken health measures including quarantine, social distancing, and closing of borders; and has introduced a set of fiscal and monetary measures to support economic activities.

Tax Measures

The fiscal measures include tax exemptions in relation to value added tax (VAT) and customs duties on imports of humanitarian goods and on donations; a VAT credit for imported capital goods and raw materials for the production of essential goods; deferred payment of social security contributions; and price regulation for certain medical goods.

To improve tax efficiency and governance, Angola aims to accelerate computerization of the tax administration and to require mandatory e-filing. The tax administration plans to speed up recovery of tax arrears; improve tax auditing; and reducing tax fraud. For the period after the crisis Angola has drawn up a revenue collection action plan, to step up the monitoring of key industries and focus on the largest taxpayers.

Spending reductions

Reductions in government spending have included a freeze of 30% of purchases of non-essential goods and services; and a reduction in the number of government ministries. Angola has also provided additional liquidity support to banks, a credit stimulus program and temporary suspension of debt service payments.

Next moves

The IMF report concludes that Angola must continue to stabilise the economy, controlling inflation and continuing with structural reforms including privatisation. Improvements are required in the governance of state-owned companies and the legal frameworks must be strengthened. These reforms would contribute to improving the business environment and create a climate for foreign direct investment and growth through economic diversification.