Sensible PLANNING
The Ministry of Finance continues to work hard to ensure Angola’s fiscal system is more resilient and sustainable while keeping its debt stable.
What have been the main activities and proposals of the ministry since your appointment?
Our main focus has been fiscal consolidation, expanding our tax base (income, property, assets, consumption, transactions, and other economic activities subject to taxation), and reforming the fiscal system to make sure we are maximizing the efficiency on the fiscal revenue side. We want to optimize these procedures in order to guarantee the sustainability of the financial system. We implemented the VAT, which was a huge reform. From 2019 to 2020, our fiscal revenue increased by 41%, which is remarkable. It was especially important because of the pandemic and the drop in oil prices, and it helped us to deal with the shortfall of revenues from that sector. We were also working on a combination of making the administration more digital and reducing paperwork to reach people more easily, so we can increase efficiency. We reduced the corporate income tax from 30% to 25% for general groups, with the exception of banks, oil, and telecommunications, which remain at 30%. We have another positive exception for agriculture and fisheries, which moved from 15% to 10%. We want foreign companies to invest in Angola by deploying a friendly fiscal environment. In terms of expenditure, we suspended all projects without a stable source of financing. Currently, we only maintain budget projects that have financing from a multilateral institution like the World Bank. We negotiated with our creditors for additional time to manage debt obligations, while doing initiative-taking debt management towards our medium-term debt strategy drafted with the IMF and World Bank that we are implementing. The objective is to avoid short-term financing lines as much as possible.
Public debt remains at 107.1% of GDP. How is the government approaching this situation?
The best way to address it is by expanding our GDP. This is why we are working on the business environment to align our legal framework, making our administration less bureaucratic, and showing all the opportunities available to attract private investment. We are managing the revenue side by explaining to taxpayers the importance of paying taxes, while enforcing procedures to avoid its evasion. We also need to be more creative in designing solutions: starting PPPs, launching green bonds, and so forth. We need mixed solutions to attract private sector investments to tourism and agriculture, which will boost those activities and in turn yield more revenue for more equitable regional investment. Each crisis is an opportunity, and we are taking advantage to introduce reforms we consider crucial for the future. When we generated high oil returns, we lacked the incentive to change, but when prices fell it was a matter of life or death. All these reforms were socially painful because we were subsidizing the consumption of our population. We now need to transfer this revenue to improve social conditions. We built new hospitals while improving the existing stock. And there remains much to do on the education from to improve curricula and the teaching body. Additionally, we are determined to galvanize the private sector to create employment.
What measures need to be implemented to curb the effects of high inflation rates?
We were on a good path until the pandemic interrupted our momentum. At the moment, BNA is managing the monetary policy more strictly to adjust the money supply. This is tricky because fighting inflation can create certain problems for the real economy and the treasury, since banks lack sufficient money to concede credits and buy the bonds that the treasury needs to finance itself. BNA has increased interest rates, though if it does it more, the cost of credits will be excessively high for families, companies, and the treasury. It is calibrating monetary policy as long as it transmits efficiently to inflation. The kwanza is currently sustainably appreciating, and so the challenges lie with the monetary policy and how the real sector responds to the incentives we are putting in place to overcome external pressure.