"Home-grown" poverty reduction plan to be presented to IMF

Despite making progress since the end of its civil conflict, Angola still needs a deal with the International Monetary Fund (IMF) to overcome "daunting challenges", a senior Fund official has said. "Angola needs a Fund programme to restructure its debt, to access concessional financing, to have donor support and to ensure that the macroeconomic gains it is making now are sustainable," IMF Alternate Director Peter Gakunu said during a three-day visit to the oil-rich country last week. He told reporters that Angola had expressed a preference for creating "home-grown policies", which it would ask the IMF to approve, rather than a more rigid Staff Monitored Programme (SMP). Agreement on an SMP is seen as a significant milestone and the gateway to cheaper financing and increased donor support. "In as far as Angola's relations with the Fund are concerned, the authorities have made it very clear that their relationship with the Fund has faced a number of problems. There seems to be the view that the Fund staff come here with pre-prepared briefs and positions, and do not really take into account Angola's economic and social situation or how the economy functions," Gakunu commented. The government wished to discuss an alternative method of monitoring the country's performance. "This means that the Fund will not come with a pre-determined programme that it will impose on Angola," he explained. A Poverty Reduction Strategy Paper (PRSP), currently a work in progress, would form the basis of this alternative programme. PRSPs are prepared by governments in low-income countries through a participatory process involving domestic stakeholders as well as external development partners, including the IMF and the World Bank. It describes economic, structural and social policies and programmes for achieving growth, and the required financing needs. "(The authorities) are trying to see how they can bring all the parameters together so that they have an actionable plan, but there are capacity constraints and they are asking the Fund to provide technical assistance," the IMF official said. Gakunu, who was appointed to the post of Alternate Director last November, met several ministers and their deputies during his visit, including Finance Minister Jose Pedro de Morais and the deputy Prime Minister, Aguinaldo Jaime. He denied that Angola's decision to ditch the idea of an SMP was a setback. "If the government of Angola was not comfortable with what was being discussed by the Fund, you could not expect it to go ahead with it," he said. "We are there to welcome governments ... We don't set the pace, but we let them understand the consequences and implications, and then they follow their own mechanisms," he noted. Observers have grown increasingly doubtful of a quick deal with the IMF, commenting that additional government revenue from sky-high oil prices and deals such as the $2 billion credit line from China had reduced the need for friendly relations with the international lender. The IMF has in the past baulked at Angola's fondness for expensive oil-backed loans and Gakunu urged the authorities to present the 'home-grown' opportunities for IMF approval as soon as possible. "I understand the concern that the government has in terms of ensuring that development continues and is sustained - therefore the need for the government to use the resources it has as collateral to raise financing for the activities it wants to undertake," he said. "But in the final analysis, the government will end up coming to the Fund with their programme, and the longer the government delays ... the more costly it will be ... This is why it is in the government's best interests to come up with this programme as soon as possible ... so it can regularise all these actions that it is taking," he added. The IMF has been highly critical of the Angolan authorities in the past. An IMF analysis, quoted by Human Rights Watch in January last year, said around $4 billion in oil revenues had disappeared from government coffers between 1997 and 2002. While their government stands accused of mismanagement and corruption, many of Angola's 13 million people live in poverty, and the country languishes in 166th place out of 177 nations in the United Nations' 2004 Human Development Index. Yet Gakunu applauded the "steadfast commitment" of the Angolan authorities in their efforts to stabilise monetary policy and the exchange rate, reign in inflation, restore fiscal discipline and improve transparency in public accounts. "We have acknowledged that significant progress had been made all fronts, but more needs to be done to sustain the momentum," he said. Reeling off a long list of urgent priorities, he urged the government to reduce subsidies, keep up efforts to construct its infrastructure and energy and water networks, provide adequate housing for its returning population and integrate the informal sector into the economy.