Angola's Fragile Stabilization
28 Pages Posted: 15 Feb 2006
Date Written: May 2004
Abstract
This paper discusses the nature of Angola`s disinflation strategy in recent years, with special emphasis on the most recent efforts by the Angolan authorities to stabilize the economy. Looking to the past, the paper stresses the costs of the disinflation strategy, as measured by the central bank sizable foreign exchange intervention and the increase in Angola`s external liabilities that unfolded in the process. The paper also notes that non-oil fiscal deficits have remained very large. Looking to the future, the paper stresses the pressing need to reduce demand pressures stemming from sizable government spending on wages and salaries, goods and services, subsidies, and other current transfers to the economy. The prescribed fiscal consolidation effort is viewed as critical to curtail the non-oil fiscal deficit, reduce inflation expectations on a lasting basis, and avoid further foreign borrowing on commercial terms, including loans collateralized by future oil revenues.
Keywords: Stabilization policy, monetary and exchange rate policy, fiscal policy
JEL Classification: E52, E58, E65
Suggested Citation: Suggested Citation
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