Angola, sub-Saharan Africa’s biggest oil producer after Nigeria, won praise from the World Bank for improving controls over state finances and increasing transparency of crude sales.
“The government has improved collection and reporting processes for oil revenues and transfers,” the World Bank said in a report released in Luanda, Angola’s capital, today. “The authorities have made significant strides in improving the transparency and accountability of public financial management, but challenges remain.”
Angola was ranked 157 out of 176 countries on Transparency International’s 2012 corruption perceptions index, behind Yemen and Kyrgyzstan. In March last year, New York-based Human Rights Watch said $32 billion went missing from the state’s books between 2007 and 2010. The discrepancies in accounting were because of “insufficient annotation” of oil revenues that weren’t transferred directly to the state by Sonangol EP, according to the government.
Budgetary uncertainty tied to the flow of oil revenues should be reduced amid “quasi-fiscal operations undertaken” for the first time by state-owned Sonangol, the World Bank said.
Oil dominates the southwestern African nation’s economy, accounting for more than 60 percent of domestic output and 97 percent of export earnings. Offshore fields operated by companies including Exxon Mobil Corp., Chevron Corp., BP Plc and Total SA pump about 1.8 million barrels of oil a day.
Angola’s oil reserves are likely to last about 20 years, so the government has to prioritize diversifying the economy, said World Bank lead economist Julio Revilla. Angola is also highly exposed to global economic developments, and is at risk from ongoing uncertainty in Europe and a possible slowdown in China, he told reporters in Luanda, the capital.
The World Bank said it forecasts Angola’s economy to expand 7.2 percent this year, down from about 8.1 last year, and 7.5 percent in 2014.
“These projections are based on sustained increases in oil production, relatively stable international prices and continued growth in the non-oil sectors, particularly construction,” the Washington-based lender said. “Despite its favorable near-term outlook, Angola’s reliance on oil revenues and imports leaves the economy highly vulnerable to external shocks.”
Angola’s decision to establish a sovereign wealth fund may help stabilize government spending in the face of oil-price volatility, the bank said. It called for the fund’s mandate and governing framework to be more clearly specified.
Less than a quarter of companies operating in Angola have more than five competitors, undermining the nation’s competitiveness, said World Bank senior economist Marco Hernandez. Businesses are also hamstrung by difficulties in accessing credit, he told reporters in Luanda.