The International Monetary Fund has urged Angola to step up fiscal discipline and structural reforms as declining oil production continues to weigh on its economic outlook, following the conclusion of its 2026 Article IV consultation.
The Fund said Angola’s economy grew by 3.1 percent in 2025, supported partly by public spending, while inflation eased to 12.4 percent in March 2026 due to tight monetary policy by the Banco Nacional de Angola.
However, a significant drop in oil output weakened both fiscal and external balances in Africa’s second-largest crude exporter. Lower oil revenues and spending overruns pushed the fiscal deficit to 4.1 percent of gross domestic product, while the current account surplus narrowed sharply to an estimated 0.4 percent of GDP.
Angola’s international reserves remained broadly stable at the end of 2025, covering about 7.4 months of imports, the IMF said.
Despite some near-term relief from higher global oil prices, the IMF warned that Angola’s medium-term outlook remains subdued due to a structural decline in oil revenues, underscoring the urgency of economic diversification.
“The outlook remains subject to considerable downside risks, particularly from oil price volatility and tighter global financial conditions,” the IMF Executive Board said in its assessment.
The 2026 budget aims to reduce the fiscal deficit through expenditure adjustments, while maintaining critical spending. The IMF welcomed this approach but stressed the need for sustained fiscal consolidation in line with Angola’s Fiscal Sustainability Law.
Directors recommended that any windfall gains from higher oil prices should be used to reduce public debt and rebuild financial buffers, rather than increase spending.
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Public debt is expected to rise toward the legal ceiling in the medium term, with gross financing needs also projected to increase, highlighting vulnerabilities in Angola’s fiscal position.
The IMF called for measures to improve spending efficiency, boost domestic revenue mobilisation and accelerate fuel subsidy reforms, while ensuring support for vulnerable populations.
It also urged stronger public financial management and reforms of state-owned enterprises to reduce fiscal risks and improve efficiency.
On monetary policy, the Fund endorsed the central bank’s tight stance to curb inflation but called for improvements in policy implementation and greater exchange rate flexibility.
“Measures to increase exchange rate flexibility and ensure alignment with the market-clearing rate are essential,” the IMF said, adding that a transparent and rules-based foreign exchange intervention framework would help manage volatility while preserving reserves.
The IMF also highlighted financial sector risks, despite progress in strengthening regulatory and supervisory frameworks following the 2025 Financial Sector Assessment Program.
It pointed to vulnerabilities linked to the sovereign-bank nexus, legacy non-performing loans and foreign exchange liquidity imbalances.
Directors urged Angolan authorities to enhance risk-based supervision, operationalise bank resolution mechanisms and take decisive action to resolve troubled lenders.
They also called for swift implementation of an action plan agreed with the Financial Action Task Force to help Angola exit the watchdog’s “grey list”.
To support private sector-led growth, the IMF recommended deeper financial intermediation and improved financial infrastructure.
More broadly, the Fund stressed that structural reforms remain critical to achieving sustainable and inclusive growth, including improving governance, easing business regulations and expanding access to credit.
Angola’s heavy reliance on oil exports has long exposed it to global price shocks, making diversification a central pillar of its economic strategy.
The IMF said the next Article IV consultation with Angola is expected to take place on the standard 12-month cycle.
