WORK IN PROGRESS
The government has had its hands full of late, with a range of challenges since 2014 hampering efforts to diversify the economy, attract long-term foreign investment, and ensure healthy finances.
Public debt soared to an estimated 120.3% of GDP in 2020, fueled by the depreciation of the kwanza and the drop in oil prices, but the implementation of debt re-profiling agreements and the forecast expansion in GDP, mainly driven by higher oil prices, helped bring this figure under 100% by the beginning of 2022. Inflation still remains the greatest concern for the central bank, which has attempted to sustain the liberalization of the local currency, guarantee its stability, and control inflation while applying a more restrictive monetary policy.
The government has implemented a significant fiscal consolidation over the past several years with the objectives of expanding the national tax base. On top of that, there has been a substantial reduction in the corporate tax rate since 2014. Vera Esperança Dos Santos Daves de Sousa, Minister of Finance, sat down with The Business Year during the research for this publication, telling our editor that the “reduction of the corporate tax rate is a long-term policy; we need fiscal stability. There cannot be any uncertainty about our fiscal policy. We will see the benefits of this measure in the medium term. We see more companies and businesses opening, and that should be the base to collect taxes.”
In contrast, the banking sector remains fragile, prioritizing the public over the private sector for its credit concessions. The authorities are committed to implementing a three-year reform program supported by the IMF. The authorities have also affirmed their commitment to improving governance and fighting corruption within the main banking institutions.
In the insurance sector, the penetration rate in Angola continues to be quite low, with coverage at around 1% GDP. The market has 20 insurance companies, but is still showing signs of overcrowding, with the five largest companies accounting for 75% of total market share.