IMF approves $1 billion in funds for Angola, adds $765 million to program

WASHINGTON (Reuters) - The International Monetary Fund said on Wednesday it had approved immediate disbursement of $1 billion to Angola under an existing program and increased its total funding access by $765 million to help it grapple with the coronavirus pandemic.

The IMF executive board’s decision came after completion of a third review of Angola’s $3.7 billion, three-year program under the IMF’s Extended Fund Facility approved in December 2018.

IMF Deputy Managing Director Antoinette Sayeh said the West African country should continue its efforts to reach a market-clearing exchange rate and advance restructuring of two public banks, and urged it to remain vigilant about public debt.

In a statement, Sayeh said there was little room for further monetary easing and the National Bank of Angola should stand ready to keep inflation in check.

Africa’s second largest oil exporter has seen its debt-to-GDP ratio blow out to 120% with more than 90% of its debt denominated in hard currency, mostly U.S. dollars, according to calculations by ratings agency Moody’s.

A 22% tumble of the kwanza currency AOA= since the start of the year and a sharp decline in oil price, the country's main source of hard currency revenue, has ramped up the pressure on Angola and led to a sharp rise in inflation.

Data showed inflation jumped some 23% in July to late-2017 levels.

“Timely implementation of banking sector recapitalization and restructuring is essential to address financial sector risks,” Sayeh said, adding that authorities were preparing to address certain shortfalls identified during asset quality reviews.

She said structural reforms were critical to diversify the economy and lay the foundations for private sector-led growth. Further action is also needed to improve the business environment, strengthen governance and fight corruption, she said.

Around $1.5 billion has already been disbursed following two earlier reviews.

Early in September, the Paris Club of official creditors agreed to give Angola debt service relief until the end of 2020.

Reporting by Andrea Shalal and David Lawder; Editing by Sandra Maler and Richard Chang