Bloomberg News

Angola Approves $69 Billion Budget With $4.1 Billion Deficit

February 14, 2013

Angola, Africa’s second-biggest oil producer, approved a state budget that forecasts a deficit while doubling social spending from two years ago.

The government plans to spend $49.9 billion and collect revenue of $45.8 billion, resulting in a $4.1 billion deficit, according to budget documents. It expects to receive about $19 billion in loans and foreign aid, the documents show.

Angola is boosting social spending as it rebuilds from a 27-year civil war that ended in 2002. Oil dominates the economy, accounting for more than 60 percent of domestic output and 97 percent of export earnings. Offshore fields operated by companies including Exxon Mobil Corp. (XOM:US), Chevron Corp. (CVX:US), BP Plc and Total SA pump about 1.8 million barrels of oil a day, second only to Nigeria in Africa.

“The problem with increasing social spending is about the institutional capacity to spend, in a correct and rational way, all the money the government wants to put in these sectors,” Manuel Alves de Rocha, an economist at the Catholic University in Luanda, said by e-mail today. “It means nothing to increase this part of the budget if the money goes to the pockets of government officials.”

Angola ranked 157 of 176 countries on Transparency International’s 2012 corruption perceptions index, behind Yemen and Kyrgyzstan. Angola’s life expectancy is 47 years, according to the World Bank. The under-five mortality rate is the world’s eighth-highest at 161 deaths per 1,000 children, and 54 percent of the country lived on less than $1.25 a day in 2009, according to the United Nations Children’s Fund.

Social Spending

The budget is based on forecasts of a 7.1 percent growth in the economy this year, inflation of 9 percent, an exchange rate of 96.3 kwanzas to the dollar, and oil sales of 673 million barrels at $96 each.

Angola’s economy expanded 7.4 percent last year and has grown at an average pace of 9.2 percent over the past five years, with non-oil output growing faster at 12 percent, according to the budget.

About 34 percent of this year’s spending will be directed at social sectors with education getting 8.9 percent, health 5.3 percent and social security 11 percent, according to government documents. Oil taxes are due to contribute 3.3 trillion kwanzas ($34.4 billion) to revenue.

Reserve Cover

The government will tap foreign reserves, which reached $31 billion at the end of 2012, to help cover a budget deficit if necessary, Central Bank Governor Jose de Lima Massano, said yesterday in an interview. Reserves doubled in the last three years and now cover eight months of imports, he said.

The opposition parties of the former rebel Union for the Total Independence of Angola, or Unita, and its offshoot Convergencia Ampla de Salvacao de Angola or Casa-CE, voted against the budget. It passed with 155 in favor to 38 opposed, with five abstentions from two smaller groups. The ruling Popular Movement for the Liberation of Angola, or MPLA, controls 175 seats in the 220-member parliament.

“The state budget approval is of capital importance for party members, especially after voters in the Aug. 31 national elections supported the party governance program,” Diogenes de Oliveira, an MPLA lawmaker, said today in parliament.

To contact the reporter on this story: Colin McClelland in Luanda at cmcclelland1@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net


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