Angola, Africa’s largest oil producer after Nigeria, needs to cut its reliance on crude to buffer the economy as prices for the commodity are set to remain stable over the next three years, a central bank official said.
The economy is forecast to expand 6.5 percent this year and between 7 percent and 8 percent in 2014, while oil trades at about $106 a barrel, Antonio Andre Lopes, a vice-governor of the Banco Nacional de Angola, said yesterday in an interview at his office in Luanda, the capital. Crude oil makes up 97 percent of the country’s exports and 80 percent of tax revenue.
“The price of oil is a big threat so we need to diversify the economy to mitigate this,” Lopes said. “However, the economy is getting better and I think the oil price will be stable.”
The government is seeking to increase lending from banks to businesses in industries including construction, mining and agriculture as the southwest African country recovers from a 27-year civil war that ended in 2002. The economy is dominated by oil companies such as Total SA, Chevron Corp. and BP Plc, which helped Angola pump 1.76 million barrels of oil a day in July from offshore fields.
Angola’s $116 billion economy is forecast by the World Bank to expand 7.2 percent this year. Crude oil has gained 12 percent in the past six months to trade at $104.36 a barrel as of 10:50 a.m. in New York.
Lopes said the Ministry of Finance and the central bank’s Monetary Policy Committee are considering the timing of a Eurobond sale, while also evaluating other methods of raising foreign debt to finance a budget deficit that’s forecast to reach 3.4 percent of gross domestic product this year.
VTB Group, Russia’s second-biggest bank, is also seeking to conclude a transaction with the Angolan government similar to the $1 billion line of credit issued a year ago, Igor Skvortsov, chairman of the bank’s African operations, said in an interview in Luanda yesterday.
The planned $1 billion Eurobond is unlikely to be sold this year because “too much needs to be organized and it’s nearly September,” Pedro Coelho, chief executive officer of Standard Bank Group Ltd.’s Angolan unit, said in an Aug. 20 interview in Luanda.
The central bank has kept its benchmark interest rate unchanged at 10 percent for six consecutive months as price pressures eased. The inflation rate, which fell to 9 percent in July to meet the government’s target for this year, may decline to 7 percent in the next three to four years, Lopes said.