Government defends oil-backed loans

The Angolan government has defended the controversial practice of securing loans on the strength of its oil production. Minister of Finance Jose Pedro de Morais responded to concerns raised by the International Monetary Fund (IMF)last week, saying that oil "is the only security we can give". But Gavin Hayman, a campaigner with lobby group Global Witness, described these loans as an "expensive and opaque way of financing the Angolan government, where they mortgage a portion of the government's future oil production for up-front cash. There is no guarantee that the proceeds will be used to benefit the Angolan people, who actually own the oil". "By providing Sonangol [the state-owned oil company] and the government with a scrutiny-free source of cash, the banks are undermining the efforts of the IMF and donors to reform the notoriously corrupt and wasteful management of Angola's oil revenues," Hayman added. The IMF has consistently opposed oil-backed loans to Angola. China recently granted a US $2 billion oil-secured loan, while a syndicate of banks was expected to make available about US $2 billion to service Angola's debt to Portugal and cover the budget deficit, with the remainder being used for investment by the state-owned oil company, Sonangol. De Morais said the government had been authorised by parliament to secure these loans to cover the fiscal deficit. He added that if the government had another fund-raising alternative, "it would not be necessary to commit more oil". 'Time for Transparency', a Global Witness report released last month, alleged that at the end of 2001, Angola owed about US $9.6 billion to foreign creditors, or 129 percent of its average annual export income. The report revealed details of an oil-backed loan from foreign banks, routed through the Cayman Islands, for US $1 billion. "The IMF itself offers far better terms for long-term loans than international banks, yet Angola has routinely opted for short-term, high-interest loans from private lenders," Global Witness noted.