Interview with Dr. Vera Daves, Minister of Finance of Angola

Interview with Dr. Vera Daves, Minister of Finance of Angola


How would you summarize the influence of the last two years on Angola’s economy and finances? What is the lesson learned? Could you list the most important government interventions in support of financial stability and the budget?

Well, it was a complex process, and with a lot of hardships. We already were in a context that was not easy. Since 2016, we have had a negative growth rate and high inflation. Fiscal deficits and high inflation since 2014, negative growth rates, and, to top it off, Covid. We had already started, since 2018, on an interesting path to reverse the problems. In 2018 and 2019 we had already had a fiscal surplus. The inflation was going down and had already reduced, in 2018, close to 19 percent and, in 2019, close to 17 percent. Then Covid hit, and it took our speed away from this path of improvements in macroeconomic conditions.

In 2020 we saw the most negative growth rate that we have seen in the last few years: 5.4 percent negative. Our economy decreased a lot, inflation rose again, it went to 25 percent, and we had fiscal deficits again, so it was a hard year on all levels. Not only for the revenue reductions, but because we had to spend more on healthcare too, it was not easy. We had to suspend some public investments projects. We didn’t have any conditions to keep supporting them and raise our debts even more, and with the PIB decreasing, inflation rising, the exchange rate devaluating, our debt ratio increased tremendously; it went to more than 100 percent, so we had to be more careful with our funding spends.

There were some projects that we had to put on “standby,” and we had to take other expenses out of the budget. We went to the National Assembly to do a budget review, with expenses decreasing in some sectors and, in healthcare, we had more expenses. We made the decision to shrink the state administrative apparatus, merged ministries, and eliminated public institutes, it was reformed at all levels. It was very hard, even from the people’s point of view, in terms of expectations and motivations. It wasn’t an easy year.

Fortunately, in this process, we had a lot of support from our international partners, multilateral and bilateral, and through the initiative of SSI, we had a great relief from the debt and time to breathe. We also had other bilateral agreements that gave us even more time to breathe. As we already had been implementing reforms under the International Monetary Fund, and we already had, at that date, for example, VAT implemented. It helped to keep us stable, because non-oil revenue already had a performance that helped us balance our expenses. What would we do if we didn’t have it, right? If we didn’t, we would have been even more dependent on oil revenue, and the clash would be much bigger.

We already had VAT implemented, we already had a whole set of reforms implemented, even at public contracting, that promised us to already have some savings equivalent to the expense. That way, we survived 2020. Even though we faced so many hardships, we survived. We were brave enough to take the lockdown seriously from the very beginning, and that was bad for our economy, but, at the same time, it saved us from a collapse of the national health system, because after all of that we wouldn’t be able to manage if Covid cases got even worse.

There were also measurements in the fiscal aspect that we were already implementing to energize the non-oil sector, in the business environment, things that made us look at sectors such as agriculture, some manufacturing industry, fishery, trades, giving positive signals of activity, and it was possible to end 2021 on a high note. It was a small percentage, 0.7 percent, but it was meaningful, and the non-oil sector was the biggest growth contributor, it grew 6.4 percent, so it was very significant.

We had a positive surprise in the tax bills as well. We closed the 2021 budget waiting for a deficit of 1.4 percent, but we ended up having a surplus in 2021 close to 3 percent. That meant we were going back to the fiscal surplus trend, and that is important for us because it helps to reduce our funding and debt tendencies, and it helps us, mid-term, to reach our growth goal, which means 60 percent of the PIB. That is our goal when talking about the ratio public debt/PIB. Also, the forex market is relatively stable, and it has kept this way by the end of 2021 and 2022, and it’s even stronger from the kwanza’s point of view because now it’s the moment for the oil price to rise, which is our main export product, so our kwanza is getting much stronger. So the fronts that we are concentrating our resources on are the fight against inflation. The National Bank of Angola is in this battle through the monetary policy, and, by the way, everybody is, not only Angola but also the whole world, in this battle against inflation.

We expect to grow 2.4 percent now in 2022, but we are doing everything in our power for that to be possible and to be able to grow even more in the following years, at least above the growth rate of our population which is 2.3 percent. Growing above the growth rate of our population is our goal.

So, everything we are doing is to place structures at the population’s service, things that later will help the commercial activity be smoother, make processes easier and less bureaucratic, motivate commercial banks and development banks to grant funding, and the for Treasury to compete for less with the private sector to obtain these resources because the Treasury benefits from this too. And also, our strategy is to do less internal funding and more externally, to give space to the private sphere to grow with the bench funding. All of that, together, should lead us to the economic growth we would like to have, and that will energize our job openings because that is something we also need. We have a large number of young people hoping for more job opportunities, so that all private investment opportunities can arise. It could be local investment or foreign, it is all welcome to create value and be able to introduce this young population to our job market. In some cases, to motivate them to entrepreneurship initiatives as well, because that is something we also believe in. So that, I think, is the picture of the last two years in short. We did a lot of things, we resisted, and we were resilient. We still have work to do, and we want to do it until we feel that we have sustainable, inclusive growth.


The global economy is at risk due to political instability, but also due to rising inflation. It is expected that revenues for oil-producing countries, such as Angola, with the oil and gas prices rising, will rise. What are your expectations for 2022? How will it affect the country’s finances?

 It is always embarrassing to evaluate a sector that is supervised by another entity. The National Bank of Angola is the one that takes care of that, but we, as shareholders (at least in two public banks) keep up with it and have opinions about it.

What we’ve been noticing is that the National Bank of Angola has been trying even more to align with good international practices and demanding of the financial system this alignment. And we, who oversee the other two financial system regulators, which are the regulatory and supervisory insurance agency, and the capital markets commission, have noticed, in these two other areas, the same effort to align with the best international practices by entering international organizations where all the organizers can be found, seek to ensure that the laws, the “anchor” for the functioning of these financial institutions, are updated.

They also seek to ensure that the institutions fulfill their role, the alignment, and the best practices in financial reportsand the capitalization of institutions is something that is being really invested in by those three entities. The Angolan National Bank follows it all, even with the hardships of the process.

 An asset quality analysis has been made on the banking sector, the work was finished and at some point, we had FMI’s support. The work was completed and we concluded that some financial institutions weren’t properly capitalized, and the shareholders had to put more money in. And at the end of the process, one of them was not capable of continuing and the National Bank of Angola had to withdraw its license. It is a painful process to close a bank, isn´t it? Nobody likes to do it. It meant jobs, people’s lives, expectations, but it was necessary to keep all the other banks that were capitalized and in conditions to be functioning with proper balance, so that was done. In ARSEG the same process is being implemented, as well as in CMC.

As the institutions begin to arise, one brings capital not as dynamic as we would like. We understand this process continues, but with fewer problems. You are right when you say there is a really strong digitalization movement, because the National Bank of Angola wants to make financial inclusion happen, but for that the traditional model is not enough. So, functions such as mobile money, and Fintech is something that is happening as well, so the National Bank of Angola is energizing it all.

Some financial institutions are more advanced than others, but that is good, too, because competition is positive. So, I would say that both the financial and oil sectors are, in Angola, the sectors that are closer to what is done around the world. So, being in Angola or being overseas, talking about the oil and financial sectors is relatively the same thing. In terms of law, rule compliance, in terms of demands, service quality, we can improve, but still, we are getting better at the quality of our service. So, I think yes, on average, the sector has had a good performance.

In your opinion, what is the situation of the financial services industry in Angola? How have banks’ roles changed over the years and what is the level of services today? What are the most important tendencies that we should be mindful of for this sector?

 Well, these are international institutions, and I think that the results speak for themselves, don´t they? We have a ranking, Heritage Foundation, I think that is what it is called, that classifies the economic freedom, and, in this classification, we did better in 2020: we went from 141 to 139 I think, in terms of position. It has its basis in judicial freedom. Our judicial power here is more active and more alive.

As on the tax topic, transparency and security of transactions in the tax field were analyzed. So, these items motivated the improvement of Angola’s position, from 141 to 139. We still have a long way to go, without a doubt, we are still far away from where we would like to be, but we will keep trying by reviewing all reports that create a good environment so that the ones that negotiate in Angola feel free. In the private investment law, for example, we disassociated the obligation that postulated that those who invest have to do so with a local partner. We excluded that from the private investment law. If you want to invest, you can come with your capital by yourself, you no longer need anybody else to do that. I think that that was a big step.

We also made the partial opening of the capital account. Now, the ones that invest in Angola to bring dividends to their home country no longer need to ask for a license from the National Bank of Angola. You can transfer through a bank, and you merely have to respect the compliance rules of this bank. I think this is also an important victory in terms of economic freedom. And other little steps that we’ve given that are walking towards that, that are not an obligation yet because not all the investors have started to experience the benefits.

But when they do and answer those surveys that will later change these rankings, I think that the reforms that we are implementing will be more accepted. When talking about the whole country, the results speak for themselves. We had the three rating agencies do an upgrade to Angola’s rating in the last months, and all of those have a stable perspective, which is good. Also, all of those were showing positive aspects related to the institution’s governance, showing that the governance of institutions is more transparent and more solid.

We’ve also been working on implementing our reform program, the debt management strategy, which has been proactive. We don’t want the problem to explode in your hands and we are proactively solving it. The quest to diversify the country’s sources of growth and the economics’ funding were some of the reasons why these three asked to do the ratings upgrade. This also means that the risk, the perception of risk, is also getting better in the marketplace when it comes to Angola. The most recent evidence of that was our Eurobonds mission, which we did last week, so that in a war situation — as you know between Russia and Ukraine and in our current context of the Fed´s interest rates rise, high inflation rates, high volatility in the markets — we were able to put $1.75 million at a rate of 8.75 percent. I think that was a good rate because we started at 9 percent, and we managed to get down to 8.75 percent, and that had a four times higher demand than the amount we wanted to put. I believe that shows the investor’s desire, that handles several emerging economies every day, and that saw potential in Angola to put their liquidity, and for a relatively long time, the issuance was ten years ago. So, I think we are improving in terms of country risk, and we will keep building our way up so that this perception improves even more.

Nowadays, what are the fastest-growing sectors in the Country?

 Agriculture is the champion. We are growing in the fishery sector as well. Now, in the last trimester, we had significant growth in transport, but that could also be related to the end of our lockdowns and the activity coming back, so there was this peak, but I believe that later it will stabilize. But the growth that I would say will continue happening is, without a doubt, agriculture, fishery, industry. These are sectors that should keep growing, but I would say agriculture tops all of them, for all it has done in terms of investments, effort, commitment and motivation, as well, for the ones who are on the side of the private sector.

So, I would say these three should be the growth engines of the non-oil economy in the following years. In the oil sector, the investments will keep happening to maintain stable production. With time, we should see interesting things happen in the gas field. We are seeing that the private sector is making moves in that direction, and also in non-renewable economies. Solar panels are something that are also happening but in a logic of public investment still. Solar panels are public investments, gas is a private investment. We should see interesting investments in this field as well, with regards to energy.

What are the government’s long-term plans and funding necessities? How will the Angolan economy be ten years from now concerning the fiscal balance, debt, and macroeconomic indicators?

We have goals, in the field of our fiscal sustainability law. Our main goal is to reach values ​​equal to or less than 60 percent of the PIB, which is the debt stock. And that is the reason why we are working, and, ideally, we can get there before these ten years. In terms of economic growth, our goal is to grow above population growth, so we need 3.5 percent of growth. And in the next 10 years, we would like to be growing above that, to be capable to generate effective value, and also to have an effective impact on people’s lives. Ideally with single-digit inflation as we’re still in the double digits. And also, the exchange rate behaves according to economic fundamentals, as the market is now free. I can’t anticipate what will happen in the forex market, but we are doing everything to have more export products, not just oil. That way, if the oil has a negative performance, other export products can make up for it. To strongly want a reduction in oil dependence, in terms of export revenue, in ten years can be too ambitious, but to at least reduce it as much as possible, so that this dependency is mitigated, is desirable.