- When the Angolan government last month inaugurated its Development Bank, which is to receive up to five percent of Angola's oil revenues, this was against the strong advice of the International Monetary Fund (IMF). Alarmed by poor transparency in the Angolan economy, the IMF warned the Bank would only "promote inefficiency and moral hazard."
In mid-March, the Angolan government in a cabinet meeting decided on the creating of the Banco de Desenvolvimento, the national Development Bank. This bank is now to receive and manage regular funds from Angola's significant oil revenues and finance development and business project that aim at diversifying the strongly oil-dependent economy. Up to five percent of annual oil revenues - estimated at US$ 10 billion in 2005 - are to flow into the Development Bank.
It is now known that the Angolan cabinet at the time of making the decision was aware of an IMF warning against this project. The controversial decision to set up the Bank was taken at the first day of a 15-day visit to Angola by an IMF team, on 15 March. The IMF team, which is to advice Angola on its economic policies and fight against poverty to make the country eligible for international financial aid, strongly advised against the establishment of the Bank.
According to an IMF report issued after the visit, the Bank's concept is too risky. The analysts called it "a retrograde step" to grant "subsidised lending to the private sector without collateral or an adequate equity stake." Handing out loans to the local business sector without sufficient security would lead to the funding of many projects that have limited possibility of succeeding.
"The evidence from other countries - and of past experiences in Angola - is that such institutions are prone to poor governance, including privileged access and to emergence of non-performing loans, and that they promote inefficiency and moral hazard," the IMF report says of the planned Development Bank. The same report also criticised the government for the lack of transparency in the country's two dominant economic sectors: the production of oil and diamonds.
Instead of investing up to five percent of national oil revenues in a potentially "inefficient" Development Bank, Angolan authorities were advised to seek other measure to strengthen economic diversification, including the improvement of the overall business climate. "There are more effective ways to address the problems of inadequate finance for micro, small and medium-size businesses including through microfinance, venture capital, and supportive action on contract enforcement," the IMF advised.
Despite these critics, the Angolan cabinet, presided by President José Eduardo dos Santos, on 15 March decided to go ahead with the establishment of the Bank as "an executive, financial instrument of the government's development and investment policies." The aim of the Bank was said to be "supporting the economic and social development of the country ... stimulating growth in investments and productivity."
The government-controlled Agência National para o Investimento Privado (ANIP) this weekend celebrated the foundation of the new bank as a way to "strengthen productive activity" in Angola. The country's economic structure would "potentially see a significant change in the near future" due to the new Bank, ANIP held.
The Angolan Development Bank was to shift attention "towards the encouragement of non-extractive productive activity in the country," ANIP reveals. The Bank would "strengthen the local enterprise. The institution will focus on the financing of long-term projects, involving large amounts, thereby enabling the capitalisation of national firms. The bank will create an extremely strong business class with a financial capacity capable of competing with foreign investors," the state agency promises.
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