Minister recommends caution to avoid debt

  • Minister of State for Economic Coordination, Manuel Nunes Júnior
​​​​​​​Luanda – The minister of State for Economic Coordination, Manuel Nunes Júnior, said Tuesday in Luanda that Angola must adopt a prudent budgetary policy to get rid of the prevailing economic recession and thus avoid an unsustainable debt.

Speaking to the daily Sate-owned paper Jornal de Angola, the official said it is crucial for Angola to speed up the resumption of its economic growth,  reduce the need to get indebted and settle the debt.

This, he added, requires two measures, which include getting out of the situation of economic recession in which the country has plunged, entering an economic growth trend and adopt a prudent budgetary policy, thus seeking to reduce the National Treasure debt.

According to Manuel Nunes Júnior, public debt (both internal and external) constitutes a major constraint to the national development effort, as it covered, in 2018, about 59 percent of the country’s total spending.

However, Nunes Júnior added, the above figure dropped in 2018 from 59 percent to 55,9 percent, in 2020, and is expected to further fall to 52,5 percent.

According to the minister, the burdern of the debt on the country’s global spending is still high, but tends to decrease.

Concerning Angola’s external debt, he said the authorities took a relevant step in 2020, by adopting measures that expanded the resources to meet the major national needs.

This includes joining the Debt Service Suspension Initiative (DSSI), recommended by the G-20, and the negotiation with the main creditors that represent 55,2 percent of Angola’s debt service.  

He added that the measures will also enable the country to pay part of the debt service until 2023, and create a fiscal space of about Usd 6.0 billion in the coming two years.

On the other hand, Manuel Nunes Júnior said despite prevailing risks, the Executive is expected to mark 2021 as the economic resumption year, with a positive growth rate o one percent.

He recalled that from 2015 to 2017, Angola showed negative budgetary balances, the highest of which in 2017, reaching 6,9 percent of the GDP.

Meanwhile, he underlined that, as a result of the fiscal consolidation measure implemented by the Executive, this trend has been reversed since 2017, with Angola recording positive budgetary balances in 2018 and 2019.

He acknowledged that in 2020, due to Covid-19, Angola again had a fiscal deficit of 1.5%, anticipating, however, that the country will return to positive budgetary balances as soon as economic conditions permit.

 

This, he added, will lead to a decrease of the State's debt needs, with a decrease in market interest rates trend.

 

The minister of State asserted that the path of fiscal consolidation followed by the Angolan Executive “is the most appropriate" .

 

In the interview, Manuel Nunes Júnior also said that he had no doubts that the huge dependence of the Angolan economy on resources derived from oil is the cause of the great imbalances experienced by the country, in a cyclical way.

 

He stated that between 2003 and 2014 there was a strong growth in Angola, but "mainly driven by public investments and not by an economy based on a strong, entrepreneurial and competitive private sector".

 

"Between 2003 and 2014, Angola may have spent an average Usd 9.0 billion in public investments, with resources mainly from the oil sector. At that time, the price of an oil barrel in the international market reached an annual average of Usd 102 between the years 2010 and 2014, " he said.

 

In the period from 2015 to 2019, the public investment spending fell to an annual average Usd 5.0 billion, as a result of the drop in the price of the oil barrel in the international market, to an annual average below Usd 57.

 

To Manuel Nunes Júnior, there is a structural weakness of the Angolan economy, that is, its great dependence on public investments financed by resources from the oil sector, a paradigm that needs to be changed.

 
"What is at stake is that we have a country that depends on almost one product for its foreign currency earnings and that imports almost everything it consumes. It is not a situation that means economic strength. It is a very vulnerable situation to any disturbance in the price of this export product on the international market ", commented the minister of State.

 
In his opinion, this paradigm has to be definitively changed, so that the private sector gains a more active role in the performance of the Angolan economy.

 
"Only in this way can we have an economy in the country that is able to show sustained levels of growth over time and based on criteria of competitiveness and efficiency. This is the great challenge that lies ahead," he said.

 
The minister believes that the results of this effort will not be immediate, but when significant steps are taken towards changing the current structure of our economy, problems such as inflation and interest rates, which are still relatively high in Angola, will be more easily settled.

 
This suggests structuring an economy less dependent on imports, with more significant weight in sectors such as Agriculture, Industry, Tourism, Construction, Fisheries and others outside the oil sector.

 
"This is what we are doing in a focused and devoted way. The results are beginning to show," said Manuel Nunes Júnior, to whom the increase in national production and the diversification of the economy are really happening.

 
The politician encouraged the continuous improvement of the business environment, the intensification of the economic diplomacy and promotion of the establishment of strategic international business partnerships.
"We want to move forward quickly and safely in this process of economic diversification. Any investment, including foreign ones, will always be very welcome", concluded the minister of State for Economic Coordination.

Speaking to the daily Sate-owned paper Jornal de Angola, the official said it is crucial for Angola to speed up the resumption of its economic growth,  reduce the need to get indebted and settle the debt.

This, he added, requires two measures, which include getting out of the situation of economic recession in which the country has plunged, entering an economic growth trend and adopt a prudent budgetary policy, thus seeking to reduce the National Treasure debt.

According to Manuel Nunes Júnior, public debt (both internal and external) constitutes a major constraint to the national development effort, as it covered, in 2018, about 59 percent of the country’s total spending.

However, Nunes Júnior added, the above figure dropped in 2018 from 59 percent to 55,9 percent, in 2020, and is expected to further fall to 52,5 percent.

According to the minister, the burdern of the debt on the country’s global spending is still high, but tends to decrease.

Concerning Angola’s external debt, he said the authorities took a relevant step in 2020, by adopting measures that expanded the resources to meet the major national needs.

This includes joining the Debt Service Suspension Initiative (DSSI), recommended by the G-20, and the negotiation with the main creditors that represent 55,2 percent of Angola’s debt service.  

He added that the measures will also enable the country to pay part of the debt service until 2023, and create a fiscal space of about Usd 6.0 billion in the coming two years.

On the other hand, Manuel Nunes Júnior said despite prevailing risks, the Executive is expected to mark 2021 as the economic resumption year, with a positive growth rate o one percent.

He recalled that from 2015 to 2017, Angola showed negative budgetary balances, the highest of which in 2017, reaching 6,9 percent of the GDP.

Meanwhile, he underlined that, as a result of the fiscal consolidation measure implemented by the Executive, this trend has been reversed since 2017, with Angola recording positive budgetary balances in 2018 and 2019.

He acknowledged that in 2020, due to Covid-19, Angola again had a fiscal deficit of 1.5%, anticipating, however, that the country will return to positive budgetary balances as soon as economic conditions permit.

 

This, he added, will lead to a decrease of the State's debt needs, with a decrease in market interest rates trend.

 

The minister of State asserted that the path of fiscal consolidation followed by the Angolan Executive “is the most appropriate" .

 

In the interview, Manuel Nunes Júnior also said that he had no doubts that the huge dependence of the Angolan economy on resources derived from oil is the cause of the great imbalances experienced by the country, in a cyclical way.

 

He stated that between 2003 and 2014 there was a strong growth in Angola, but "mainly driven by public investments and not by an economy based on a strong, entrepreneurial and competitive private sector".

 

"Between 2003 and 2014, Angola may have spent an average Usd 9.0 billion in public investments, with resources mainly from the oil sector. At that time, the price of an oil barrel in the international market reached an annual average of Usd 102 between the years 2010 and 2014, " he said.

 

In the period from 2015 to 2019, the public investment spending fell to an annual average Usd 5.0 billion, as a result of the drop in the price of the oil barrel in the international market, to an annual average below Usd 57.

 

To Manuel Nunes Júnior, there is a structural weakness of the Angolan economy, that is, its great dependence on public investments financed by resources from the oil sector, a paradigm that needs to be changed.

 
"What is at stake is that we have a country that depends on almost one product for its foreign currency earnings and that imports almost everything it consumes. It is not a situation that means economic strength. It is a very vulnerable situation to any disturbance in the price of this export product on the international market ", commented the minister of State.

 
In his opinion, this paradigm has to be definitively changed, so that the private sector gains a more active role in the performance of the Angolan economy.

 
"Only in this way can we have an economy in the country that is able to show sustained levels of growth over time and based on criteria of competitiveness and efficiency. This is the great challenge that lies ahead," he said.

 
The minister believes that the results of this effort will not be immediate, but when significant steps are taken towards changing the current structure of our economy, problems such as inflation and interest rates, which are still relatively high in Angola, will be more easily settled.

 
This suggests structuring an economy less dependent on imports, with more significant weight in sectors such as Agriculture, Industry, Tourism, Construction, Fisheries and others outside the oil sector.

 
"This is what we are doing in a focused and devoted way. The results are beginning to show," said Manuel Nunes Júnior, to whom the increase in national production and the diversification of the economy are really happening.

 
The politician encouraged the continuous improvement of the business environment, the intensification of the economic diplomacy and promotion of the establishment of strategic international business partnerships.
"We want to move forward quickly and safely in this process of economic diversification. Any investment, including foreign ones, will always be very welcome", concluded the minister of State for Economic Coordination.