LUANDA (Reuters) - Thousands of construction workers are being laid off in Angola because the government has failed to settle over $2 billion in arrears to foreign firms rebuilding the African nation, a union leader said on Thursday.

Francisco Jacinto, leader of the country's largest union CGSILA, said the arrears and a slowdown in the construction sector were the two main reasons behind the lay-offs.

"Thousands of people are being laid off every month because the government has failed to pay the building firms," Jacinto said in an interview with Reuters.

"I don't see an end to the lay-offs until the government starts paying."

The government has vowed to begin settling the areas this month. Finance Minister Spokesman Bastos de Almeida said the government was working to settle the arrears with the building firms.

Jacinto said that Brazil's Odebrecht, the biggest foreign construction firm in Angola, had cut its 27,000-strong workforce by more than half in the last year and had recently warned him that more lay-offs would follow.

"Yesterday the firm told us that it was letting go another 2,095 workers. It says it needs to cut costs and I'm afraid there is not much we can do," he said.

A senior Odebrecht official, who asked not to be named, confirmed that more layoffs would take place in coming weeks.

Angola, which depends on oil for 90 percent of its income, began delaying payments to the firms last year after the global economic recession triggered a slump in oil prices.

Brazil's Camargo Correia, along with Portuguese building firms Mota Engil, Teixeira Duarte and Soares da Costa, who were hired by the government to rebuild infrastructure destroyed by a civil war that ended in 2002, have all suffered from the late payments, Jacinto said.

"There isn't one company in Angola that hasn't laid off workers. Either because the government suspended some projects or simply because they haven't received money from the state," said Jacinto.

Urban Planning and Construction Minister Jose da Silva Ferreira said last announced last week that the government would start paying off the arrears in April.

The African nation has seen its economy improve significantly this year on the back of a rebound in oil prices and is seeking its first credit rating before it issues up to $4 billion in bonds to foreign investors.

Analysts say that by settling the arrears, which industry sources say are much higher than the $2 billion the government announced in July 2009, will have a positive impact on Angola's credit rating and the sale of the international bonds