The Angolan government estimates the deficit will be 0.1% of GDP in 2023, down from initial forecasts of a surplus of 0.9%, reflecting lower oil production, a weaker exchange rate and higher external debt payments.
The figures are contained in the proposed 2024 General Government Budget (OGB), presented to the National Assembly on Tuesday, which highlights some of the key factors that have shaped financial management throughout 2023.
OGE’s 2023 fiscal scenario was prepared based on an average barrel oil price of $75 and assuming oil production of 1.18 million barrels per day, assuming a global surplus of 0.9% of gross domestic product (GDP), a primary surplus . 4.9% of GDP and non-oil primary deficit (structural deficit) 6.5% of GDP.
However, forecasts were affected by lower oil production in the first and second quarters and subsequent declines in export and oil revenues.
The fall in the supply of foreign exchange in the foreign exchange market as a result of exports and oil revenues, especially since March due to high levels of external debt repayment, was reflected in a significant depreciation of the exchange rate from mid-May. and the end of June.
This evolution has led to a containment of spending to contain the impact of lower-than-expected oil revenues, and the exchange rate depreciation recorded in the second quarter has also led to a containment of the potential fiscal benefit from the fuel subsidy reform announced on 1 June. according to the justification report of the OGE.
The reform began with an adjustment of gasoline prices by approximately 87.5%: from 160 kwanzas per liter to 300 kwanzas (from 18 to 34 cents).
According to the document, fuel subsidies “continue to pose a major source of high risk to fiscal balance and sustainability in the medium to long term, so failure to effectively rationalize these expenditures will continue to reduce fiscal space to absorb future shocks and limit the government’s ability to comply with fiscal constraints set Public Fiscal Sustainability Act, and trade those spending for more productive spending.”
Taking into account all these developments, the report emphasizes, the overall fiscal balance of accounts should be -0.1% of GDP in 2023, thanks to measures taken by the executive branch that have contained larger deficits and less deterioration in economic growth. primary surplus and non-oil primary deficit.
On the other hand, a primary surplus of 5.1% of GDP is expected in 2023, “which is vital to maintaining the sustainability of public finances and is positive given that other factors competing for debt dynamics will have a negative impact on the ratio debt, such as exchange rate depreciation and economic growth slowdown.”
For the non-oil primary deficit, updated forecasts show it will remain at 6.50% of GDP, still within the time horizon required by the Public Financial Sustainability Act to reduce it to within 5% of GDP.
“If the above measures had not been taken, forecasts would have pointed to a global deficit of 2.6% of GDP (0.9% in OGE2023), reducing the primary balance to 3.9% of GDP (4.9% of GDP in OGE 2023) and a worsening of the non-oil primary deficit to 7.8% of GDP (4.9% of GDP in the 2023 OGE),” the report states.