Archer Mangueira: getting Angola's import-export balance right

Archer Mangueira took the helm at Angola’s finance ministry in September 2016, following a stint as head of the country’s capital markets commission. He inherited an economy battered by the impact of lower oil prices. Shortages of foreign exchange (FX) and a backlog of FX purchase requests from commercial banks, fiscal and current account imbalances, limited opportunities for non-oil private sector growth and an official unemployment rate of 25% are just some of the difficulties facing Mr Mangueira’s ministry.

But it is not all bad news. The International Monetary Fund expects the Angolan economy to post a mild recovery in 2017, with preliminary figures indicating full-year growth of 1.1% as oil prices have improved. Meanwhile, the authorities are pushing ahead with several ambitious short-term reforms under a six-month package known as Plano Intercalar, with a focus on fiscal consolidation and exchange rate flexibility. Plano Intercalar will provide policy direction until the government unveils its 2018-22 National Development Plan, set for inauguration in early 2018.

What is clear is that any plans for Angola’s growth model are likely to build on existing efforts to encourage the domestic production of key goods and products, and thereby diminish the reliance on imports and stem the loss of FX reserves.

But in terms of Angola’s longer term future, much will depend on the priorities established by the new administration, headed by president João Lourenço, who took over in August 2017. At this crucial juncture for the country, Mr Mangueira speaks to The Banker about his plans to foster an improved business climate, to promote domestic and foreign investment in the economy and to ensure that public finances remain on a sustainable trajectory.

Q: To what extent will the improving oil price environment help Angola’s economy to recover and gain more positive momentum in 2018?

A: Yes, oil prices seem to be going up. But it will take more than increased oil prices to ensure the economic stability that we are working towards. We hope that oil prices stay steady to guarantee that our gross domestic product [GDP] growth stabilises and develops. But don’t forget we are talking about a commodity that is very volatile in its pricing. When you talk about growth, we can’t just rely on oil prices. There are other factors that must be considered. For the country’s longer term development we need to adopt essential reform measures as quickly as possible. This will enable us to achieve sustainable growth.

Q: What are your medium-term reform priorities and what policy measures will you take to meet these objectives?

A: There are various key issues that need to be looked into and reassessed. These issues cover the fiscal and monetary side of the economy, as well as the exchange rate environment and the investment climate. A positive change in oil prices alone will not be sufficient to address our problems. We are still experiencing negative balances in our fiscal accounts; in 2016, for instance, we experienced a -3.4% fiscal deficit. By the end of 2017, we are hoping this will fall to -3.2%. So our first priority is fiscal consolidation. But in order to achieve that objective, we have to adopt policy reforms that will cover both revenue and expenditure.

Q: How are you tackling Angola’s fiscal deficit challenge from an expenditure perspective?

A: We have set expenditure limits in the latest budget with the objective of being able to meet the spending targets we have set for ourselves. In addition, various legislative measures are being contemplated in order to contain the government’s future expenditure. This is in conjunction with a proposed legislative package that will slowly wean the country off subsidies – including generous water and energy subsidies – which should generate additional fiscal space.

We are also going to adopt measures to ensure that there is a transparent bidding process for public infrastructure works, while we plan to use an electronic bidding process for the provision of goods and services to the government. Beyond these measures, the government intends to prioritise public investment that will lead to the diversification of the economy. Funds will also be allocated towards social services, including education and health.

Q: What other reforms are the government currently pursuing?

A: We are hoping to accelerate revenue mobilisation throughout Angola because this needs to be maximised. This will involve, among other measures, expanding the tax base in a way that does not increase the burden on existing taxpayers. We believe there are some undertaxed sectors of the economy where we can find additional revenue. These include tariffs on imports and new forms of property tax. We are also hoping to bring the informal and grey areas of the economy into the mainstream, which should help meet this objective.

In terms of monetary and foreign exchange policies, Angola has been carrying a heavy burden because we have been maintaining a fixed exchange rate since April 2016. This has led to a large spread between the official and parallel rates for the kwanza. Moving forward, we will look closely at this situation and consider allowing the currency to float. But this will be done with a watchful eye to ensure that the kwanza doesn’t run wild. This will allow more flexibility in terms of the country’s monetary policy.

Q: Though Angola’s public debt position is manageable, at about 71% of GDP, it is nevertheless growing. What steps are the government taking to address this situation?

A: The government is taking a series of measures to manage both its internal and external debt stocks. We want to determine how to make our debt payments more sustainable. We plan to roll over the internal debt stock, and in doing so we will reschedule these funds to ensure that they do not weigh, in the immediate term, on the treasury.

Q: What steps are the government taking to encourage greater domestic and foreign investment in the economy?

A: In terms of promoting investment, the government has come up with a robust plan to promote exports from Angola. This will generate additional foreign currency receipts beyond those created by the oil sector. Part of this plan involves improving the visa issuance process for investors wanting to do business in Angola. It also focuses on creating links between the foreign investment community and sectors of the domestic economy that have great potential but are lacking in expertise. This will bring the know-how required to take Angola’s growth trajectory to the next stage.

In addition, the government is working hard to tackle corruption and to ease taxes on exports in order to make it more profitable for the private sector. Beyond these reforms, we are investing heavily in an infrastructure and development programme to make the local economy more competitive. As a government we have to improve our economic diplomacy to showcase Angola’s potential but also to enable the international community and financial sector to invest in the available opportunities in Angola. The measures that are being implemented now are designed to ensure that they can successfully come and invest. We can’t shy away from this and that’s the only way to do it.

Archer Mangueira is the finance minister of Angola.