Angola: Selected Issues

Abstract

Angola is facing a stark trade-off between declining oil fiscal revenues over the medium term and increasing social and public investment needs. Opportunities do exist to make the most of Angola’s remaining oil reserves, whilst reducing its debt burden and building fiscal buffers. However, a sound fiscal framework for the use of oil revenues that includes a well-designed fiscal stabilization fund may be needed. This chapter assesses the macroeconomic implications of different fiscal rules for managing oil revenues in Angola, and discusses policy options to address related tradeoffs. Under a spend-as-you-go (SAYG) fiscal rule, falling oil production and volatile oil prices lead to declining revenues, volatile public investment, and rising debt. Under a more active fiscal rule, public investment can be scaled up gradually, whilst at the same time building fiscal buffers and insulating the non-oil economy from volatile oil price movements.