Angola’s oil-backed loan unsustainable — UNDP

“The current go-it-alone approach is not sustainable. Using oil-backed loans … you’re tying your hands together,” said Pierre-Francois Pirlot, United Nations Development Programme (UNDP) resident representative in Angola. “Oil reserves are not eternal; maybe for another 15 years. If you’re relying on your extractive industries, you’re not going to get very far.” Angola is sub-Saharan Africa’s second largest oil producer, after Nigeria, pumping 1.4 million barrels a day (b/d) ‘ a figure that the government expects to rise up to 2 million b/d by the end of 2007. The country is currently in the middle of a reconstruction boom financed by high oil revenues after a ruinous 27 year civil war ended in 2002. Unlike other post-conflict situations such as Iraq, Afghanistan and Sierra Leone, Angola’s government has never called for a reconstruction conference ‘ a decision which some analysts attribute to its reluctance to open its government accounts to external scrutiny. “Billions of dollars are required to rebuild infrastructure,” Pirlot said in an interview. “Symbolically, for sure, it is necessary to have a reconstruction conference to show to the international community and investors there is a long-term plan that is credible.” Some economists argue that the oil-rich country does not need international donors. Angola’s government coffers have seen a huge rise in external credit recently ‘ a primary factor in the government’s bumper 2006 Budget of around US$25 billion compared with just US$13 billion in 2005. But Pirlot said relying on foreign credit could just put off problems as Luanda consigns more of its future oil production to debt repayment. “The paradox is Angola wants to maintain its sovereignty. But it’s mortgaging its future,” he said. Finance Minister Jose Pedro de Morais said financing from foreign credit lines will rise from $800 million in 2005 to $5 billion in 2006, including US$3 billion in oil-backed credit lines from China’s Eximbank. Portugal is the latest country to offer foreign credit after it announced a 300 million euro loan last month. Pirlot said Angola needed to solicit long-term investment to diversify away from oil, adding that he envisaged an investment conference in the medium term. “You need investors to redevelop the industrial sector ‘ not lines of credit. A reconstruction conference makes sense in the medium term, but not a traditional one. More likely it would be with the private sector (than with bilateral donors) but with the UN and UNDP as guarantors … that things are moving in the right direction.” Angola has also been criticised for its use of foreign credit in the past, particularly from the International Monetary Fund (IMF) and civil society organizations who say the loans lack transparency. But the Ministry of Finance says Angola’s creditworthiness is the result of peace and good economic growth ‘ although the southwest African country continues to see almost 70 percent of the population living below the poverty line. ‘ Reuters.

May 2006
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