VZCZCXYZ0007
PP RUEHWEB

DE RUEHLU #0250/01 0731041
ZNY CCCCC ZZH
P 141041Z MAR 07
FM AMEMBASSY LUANDA
TO RUEHC/SECSTATE WASHDC PRIORITY 3800
INFO RUEAWJA/DEPT OF JUSTICE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC

C O N F I D E N T I A L LUANDA 000250 
 
SIPDIS 
 
SIPDIS 
 
FOR AF/S AND EB/OMA 
NSC FOR BPITTMAN 
 
E.O. 12958: DECL: 03/13/2017 
TAGS: EFIN ECON AO
SUBJECT: ANGOLA DECIDES NOT TO SEEK IMF AGREEMENT 
 
REF: LUANDA 70 
 
¶1. (SBU) Summary.  Angola,s Finance Minister, Pedro de 
Morais, announced that Angola will not pursue a program with 
the IMF.  Citing Angola,s progress in combating inflation 
and its growing foreign exchange reserves, Angola believes it 
does not need a stand-by agreement to ensure macroeconomic 
stability.  Many financial observers see this as a move to 
placate the domestic lobby in the run-up to elections. 
Nonetheless, a number of financial experts in Luanda expect 
that the GRA will continue to seek IMF technical assistance. 
The IMF has proposed the visit of a technical team in May. 
End Summary. 
 
¶2. (SBU) On March 12, 2007, the GRA made public its February 
13 decision and notification to the IMF that it would not 
seek an agreement.  Portions of the IMF's February 23 
response, suggesting technical meetings in May, were also 
made public.  In his notification letter to the IMF, Finance 
Minister Jose Pedro de Morais said he saw no benefit to 
Angola from an IMF agreement and pointed to Angola,s 
independent success in macro-economic stabilization and 13 
percent GDP growth during the period 2004-2006.  Minister 
Morais added that Angola,s foreign exchange reserves have 
grown, permitting it to pay off bilateral debt and secure 
financing for investment out of its own resources, without 
relying on external credit. 
 
Looking to the Elections 
------------------------ 
¶3. (C) World Bank Resident Representative Alberto Chuenca 
told us he viewed Angola,s domestic politics as the driving 
force behind the decision.  Chuenca believes image is very 
important to Angola right now:  the GRA wants to project the 
image of a sovereign state and regional power, open to the 
world and capable of managing its own affairs.  An Embassy 
expat banking contact, longtime resident in Angola, 
interpreted the move as the GRA not wanting to be subject to 
international oversight before the elections.  He elaborated 
that the decision can also be seen as primarily a domestic 
political gesture for MPLA members who would denounce an IMF 
agreement as selling out to the West.  He believed the actual 
impact would be minimal, and didn,t expect other dramatic 
moves to further distance the GRA from the international 
community. 
 
¶4. (C) Chuenca reiterated the connection to elections, noting 
that President Jose Eduardo dos Santos is reluctant to take 
any decision that might make him appear to members of his 
party as beholden to Western powers.  Chuenca thought the IMF 
announcement fit politically with the recent announcement 
that Sonangol,s operating arm would divest itself of its 
non-petroleum activities:  Angola was demonstrating its 
ability to clean its own house. 
 
Implications for IMF and Paris Club 
----------------------------------- 
¶5. (SBU) Our expat banker contact noted that since Angola has 
just paid the principle and interest on its Paris Club debt, 
but not the late interest, it may have decided it is willing 
to pay the late interest rather than enter into an IMF 
agreement, given that the Paris Club still seems to make debt 
relief contingent on an agreement with the IMF.  IMF 
technical assistance is widely expected to continue ) but 
out of the public and media spotlight. 
 
The IMF,s Program without the IMF? 
---------------------------------- 
¶6. (SBU) Miguel Alves da Rocha, Professor of Economics at the 
Catholic University of Angola observed that talks between the 
IMF and the GRA have continued for years without ever 
reaching a conclusion.  Rocha believes the IMF,s rigidity in 
prescribing specific policies to achieve transparency 
contradicted the GRA,s sense of its own sovereignty.  Since 
the IMF would or could not soften its proposals, the GRA 
decided to stop the process, concluded Rocha.  He emphasized 
however, that the GRA remained committed to incremental 
practical steps to improve governmental budget accountability 
and management.  During the recent monetary policy workshop 
in Luanda (reftel), retired experts from the U.S. Federal 
Reserve system and Treasury, as well as speakers from African 
central banks proposed actions to control inflation and 
restrict the appreciation of the Kwanza, he recalled.  In 
fact, Rocha argued, the GRA included such measures in its 
work plan for 2007-2008.  Dr. Rocha also expects the GRA to 
continue benefiting from IMF technical assistance. 
 
Comment 
------- 
¶7. (SBU) Comment:  Angola has been famous for the size of its 
oil-backed lines of credit, estimated by the World Bank at 
USD 15 billion.  Expected revenues cover only 75 percent of 
the 2007 budget, so the GRA clearly needs international 
expertise and international finance.  The fact that the May 
technical meetings were made public indicates that the GRA 
will still pursue technical consultations with the Fund, but 
not under any formal arrangement at this time.  This 
reinforces the argument that Angola is making a political 
gesture for domestic consumption and will attempt to minimize 
its impact in dealings with the IMF and the international 
community. 
EFIRD