Angola’s economy moderated in 2025, growing at 3.1% partly supported by public spending, but a significant decline in oil production weakened fiscal and external positions. Inflation eased to 12.4% in March 2026 due to tight monetary policy, but remained elevated. The 2026 budget envisages fiscal consolidation and reaffirms a commitment to prudent debt management. The medium-term outlook remains subdued, with economic growth depending on the success of diversification efforts. A recent surge in oil prices has improved access to international markets and is projected to provide a temporary offset to declining oil revenues. However, gross financing needs are projected to rise, with public debt reaching the ceiling under the Fiscal Sustainability Law in the medium term. Downside risks include declines in oil revenues, intensification of spending pressures during the temporary oil price hike, and tighter global financial conditions. Upside risks include stronger-than-expected oil production amid elevated oil prices and an easing of global financial conditions. The staff recommends a policy mix of a fiscal adjustment, supported by greater exchange rate flexibility and an appropriately tight monetary policy stance. Fiscal consolidation should be complemented by continued reforms to improve spending efficiency and maximize growth dividends. Oil windfall should be used to reduce debt and build buffers. Prudent debt management—by prioritizing low-cost financing—will remain critical. The exchange rate should serve as a key shock absorber, while monetary policy should focus on sustaining the disinflationary trend. Eliminating distortions in the foreign exchange market and developing a transparent, rules-based FX intervention framework should be priorities. In parallel, structural reforms to strengthen governance, improve the business climate, and enhance financial stability and inclusion are needed to support economic diversification.
