Angola: Request for Stand-By-Arrangement (Electronic book text)

1. Pre-crisis economic setting: Prior to the onset of the global economic crisis, Angola had recorded an extended period of rapid expansion, fueled by strong growth of oil revenues. Notwithstanding a heavily managed exchange rate with respect to the U.S. dollar, inflation had persisted at low double-digit levels, reflecting the strong pace of output expansion, significant inflation inertia, and continued supply bottlenecks. Fiscal policy had been strongly pro-cyclical, with the non-oil fiscal deficit increasing from 50 percent of non-oil GDP in 2006 to about 70 percent by 2008. Monetary and credit aggregates were expanding at an exceptionally rapid pace, with broad money growing by more than 90 percent in 2008 while bank credit expanded by about 70 percent. The economy was thus significantly exposed when oil exports suddenly plunged.