Angola: IMF loan approval likely to lead to reforms, IHS Country Risk analysis finds

Angola’s likely acceptance of the loan offer will lead to increased IMF scrutiny of the country’s public finance management with the goal of increasing non-oil fiscal revenues and reducing public spending.

Efforts to increase non-oil tax revenues are likely to include the introduction of value-added tax (VAT). Previous IMF recommendations to Angola to introduce VAT to broaden the government’s revenue base were ignored, but are now likely to be implemented in a step-by-step manner over the next 24 months.

The application of VAT is likely to be targeted, with basic foodstuffs and medicines affecting low-income groups being exempted at least until after the presidential election in 2017. Items classed as luxury goods and services are likely to become subject to VAT within the 12-month outlook.

New regulations also are likely to reduce tax exemptions, which have often been used to favour politically well-connected local service companies, especially in the oil and gas sector. Those tax exemptions aimed at attracting major energy multinationals to explore new acreage to prevent a rapid decline in oil output are unlikely to be removed. New procedures in public procurement aimed at improving transparency and reducing waste and corruption also are likely to be introduced. The introduction fiscal changes will depend on oil price developments: should prices rise towards previous peaks, it is unlikely that Angola will follow through with the changes currently being proposed.

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