20100927
africanews

WASHINGTON (Reuters) - The International Monetary Fund said on Monday it had approved a $353 million loan for Angola following reviews of its program and urged authorities to move swiftly to clear the bulk of domestic arrears.

In a statement, the IMF said its executive board had granted waivers for targets that were not met to qualify for the loan, which brought the amount advanced to Angola under the 27-month stand-by-agreement to $882.9 million.

"The accumulation of domestic arrears has created difficulties in both the real economy and the financial system," said Murilo Portugal, deputy managing director and acting chairman.

"The authorities need to implement vigorously their arrears resolution program, aimed at clearing the bulk of the arrears by end-year, and to strengthen expenditure control and budget financing to avoid incurring new arrears."

Angola rivals Nigeria as Africa's biggest oil producer and hopes the loan program will bolster its credibility among international investors.

Portugal said plans by the Angolan authorities to further reduce the non-oil primary deficit in 2011 and bring it closer to sustainable levels were a positive development.

He also welcomed the southern African country's plans to establish a sovereign wealth fund to smooth the spending of oil revenues over time.

"The proposed fund will need a sound institutional framework with clear accountability, well-specified linkages to fiscal policy, and a conservative asset management strategy," said Portugal.

While recent steps to reform the foreign exchange auction system were welcome, the Angolan central bank should use the "outlier" policy sparingly in order to allow the exchange rate to move to its market clearing level, he said.

"Strengthening fiscal-monetary policy coordination and enhancing the tools for monetary management will increase the effectiveness of monetary policy," said Portugal.