ANGOLAN GOVERNMENT DEMONSTRATES INCREASED WILLINGNESS TO

UNCLAS LUANDA 001261

SIPDIS

SENSITIVE
SIPDIS

NSC FOR AF/BOBBY PITTMAN
STATE FOR EB/IFD AND AF/S

E.O. 12958: N/A
TAGS: EFIN ECON EAID AO
SUBJECT: ANGOLAN GOVERNMENT DEMONSTRATES INCREASED WILLINGNESS TO
WORK WITH IFIS

REF: LUANDA 975


1. This is an action request. See paragraph 9.


2. (SBU) Summary. The GRA has indicated to the IMF more interest
about entering into a Standby Agreement (SBA) than at any other time
in the recent past. IMF reps described meetings with high level
government and party officials were very positive and are awaiting
the GRA's response on a proposed 1 year stand-by agreement. This
new level of interest also reflects radical changes in Angola's
financial situation over the past three years and the GRA's desire
to better manage the massive in-flow of foreign exchange it faces
as a result of increased oil revenues. The World Bank also issued
Angola's first Country Economic Memorandum since 21990 and the GRA
has been open to full disclosure and publication of the text, which
it reviewed and approved. The Angolan National Bank (BNA) has
requested technical help from the U.S. Treasury to deal with
problems of supervision, lending rates, foreign exchange and money
laundering (ref a). Post believes this is an opportune time to
extend that assistance. End Summary.


3. (SBU) On December 6, the Ambassador met with members of a
visiting IMF delegation which has been holding discussions with the
GRA about entering into a one-year Standby Arrangement (SBA).
Delegation members found the GRA officials to be much more
interested, and spoke with more authority about a stand-by agreement
than during previous visits. Besides meeting with Finance Minister
Pedro de Morais and Prime Minister Aguinaldo Jaime, the IMF also
briefed the MPLA's chief economic advisor, Manuel Junior, who is
also close to President Jose Eduardo dos Santos, and worked
extensively with Ministry of Finance technical experts

What's in it for Angola?
--------------


4. (SBU) The GRA representatives see an SBA as a tool to keep some
government spending in check. For example, they told the IMF they
hoped that participation in an IMF program would keep the
newly-founded Angolan Development Bank (BDA) from exceeding its
statutory cap of 5 percent of petroleum receipts. GRA interlocutors
told the IMF they also hope technical assistance and working
together with the IMF will lead Sonangol toward divesting itself of
its conflicting roles as granter of oil concessions, concessionaire,
and conduit for the GRA's oil royalties. Expatriate oil
professionals have told us that even though Sonangol captures the
best of Angola's workforce it must still rely on the technical
expertise of foreigners working short-term contracts and therefore
has less institutional memory than it needs. The Angolans are
seeking to engage the IMF, and those with whom the team met seem to
be putting together the best case for pitching both this one-year
stand-by and engagement writ large.

The GRA Also Wants U.S. Technical Assistance
--------------


5. (SBU) According to the IMF delegation, J. P. Morgan has been in
touch with the IMF about a credit rating for Angola. The IMF
delegation noted that Angola has been using its windfall oil
revenues to pay down its debts, including making a payment of USD
100 million owed to bilateral creditors in the Paris Club. In early
December 2006, the Angolan Central Bank (BNA) applied to open an
account with the Federal Reserve Bank of New York, a step which will
also entitle it to a certain amount of technical assistance.

World Bank Country Economic Memorandum Released
-------------- --


6. (U) At the end of November, the World Bank released its first
Country Economic Memorandum (CEM) on Angola since 1990, dated
October 2, 2006. The World Bank and the GRA consulted on the CEM
and it was released with the GRA's concurrence. The Bank identifies
six key aspects of Angola's current stage of development: complete
the transition to a market economy; improve management of public
expenditures; manage the oil and diamond wealth transparently;
improve the business environment and investment climate in Angola;
increase agricultural output, and improve the quality of public
services, especially to the poor.

Media Emphasis on Statistics
--------------


7. (SBU) The official newspaper Jornal de Angola published a
positive article about the CEM following its release. In addition,
its edition of December 8 featured two articles on the importance of
statistics to government, echoing a theme the IMF and World Bank

have emphasized for years in their dealings with Angola. Roberto
Alameida, President of the National Assembly, called for credible
and reliable statistics meeting the UN standards in an address to an
SADC seminar on management and statistics, according to one article.
These press reports may signal that Angola will make the effort to
improve its statistics in order to make itself acceptable to the
international community in an area critical to financial policy.



8. (SBU) Comment. The IMF has described encouraging signs of
movement within the GRA. The IMF wants to point the GRA toward
increasing accountability, and the GRA appears to be moving toward
closer engagement with the international community. The USG can now
take some timely action which may encourage Angola's steps toward an
IMF agreement. The BNA has asked for help from the United States on
monetary policy and foreign exchange control, and to combat
counterfeiting and money laundering.


9. (SBU) Action Request and Comment, Continued. The BNA's request
provides the USG with an opportunity to move Angola's banks closer
to international standards. That, in turn, should encourage banks
to provide more credit to the non-petroleum sector. Embassy
believes that the USG should take advantage of Angola's willingness
to engage more broadly with the international community. In reftel
A, the BNA requested technical assistance from the USG for managing
the money supply and for combating money laundering and
counterfeiting. Accepting the BNA's invitation would give the USG a
role in modernizing Angola's financial sector. Improved capacity
for Angola's banks will also help U.S. corporations as Angola is
expected soon to phase in a requirement for oil companies to deposit
their operating budget in Angolan banks at the beginning of each
calendar year. Post requests that the U.S. Treasury respond
positively to our request for technical assistance.
EFIRD