Watching Government - Angola and IMF

Aug. 4, 2003
Attractive geology and reform-minded politicians make Angola an encouraging place to drill for oil.

Attractive geology and reform-minded politicians make Angola an encouraging place to drill for oil.

Companies hope the country's new leaders follow the advice of the International Monetary Fund, which may lend the sub-Saharan nation money provided future loans are tied to tighter anticorruption measures. Angola relies on oil sales for about half of its gross domestic product and is shortly expected to increase production to 1 million b/d of oil, possibly by next year.

This month Angola and IMF are expected to spell out new fixes for an economy torn by 28 years of civil war.

Housecleaning

Under an April 2000 deal with IMF, Angola allowed outside auditors to examine how the government spends its oil money. Three years later, Angolan officials themselves admit there is a lot of housecleaning left to do.

"In the past, we had off-budget transactions, so the budget lacked credibility," Angolan Deputy Prime Minister Aguinaldo Jaime told industry executives at a London oil conference, according to Reuters June 19. "For the first time in Angola's history, the budget will encompass all revenue, and that will send to the donor community the signal that the Angolan government is committed to a fully transparent way of managing the budget."

A month after that speech, the Angolan government posted on the internet preliminary findings of a KPMG LLP report detailing petroleum revenue management.

The report found that the state-owned Sonangol EP group "suffers from a generalized lack of internal controls relative to its operational results in its three main activities, oil, gas distribution, and aeronautics."

Next steps

Human rights groups said they are encouraged by the government's recent actions to improve transparency, but say more concrete steps are needed before the country deserves international loans.

"There is a real danger that once the Angolan government obtains a positive decision on access to debt relief and IMF funding, transparency reforms will simply be abandoned," said Simon Taylor, director of London-based human rights group Global Witness.

To be fully credible, Angola should join an international anticorruption scheme, Global Witness said. The group pointed to the UK-led Extractive Industry Transparency Initiative as a good way to make sure that revenues benefit all of the country's citizens and not just a select group of corrupt government officials.

IMF officials will not comment on whether Angola wants to follow its advice. But oil companies seem optimistic, for now at least, and appear to be willing to take Angola at its word that there will be less corruption.

Whether the politicians now in power will keep their promise is not yet known. But what does seem more certain is there will more oil money coming into the government's coffers. Over the past few months, several multinational oil companies have reported major discoveries. After a series of dry holes, majors have started reporting promising discoveries including the ultradeepwater Saturno and Gindungo fields (See related item, p. 8).