Renato Aguilar and Mario Zejan*
At the end of 1990 the Angolan economy was in very bad shape. The currency was enormously overvalued, and the price system widely distorted with a strong bias against production and agriculture, and for urban consumption. Public finances were in disarray. They depended on highly-variable oil-related incomes. There was a large deficit. Non-oil production was decreasing sharply and non-oil exports were ruined. Other signs of economic disruption were the economic isolation of rural areas, demonetization of the economy and deterioration of public services and the infrastructure. The future economic viability of the country is in balance.
There are several reasons for this situation. The costs associated with the war of independence and those due to the colonial legacy are to blame for some of the economic problems. The on-going civil war and international intervention have also contributed to the present economic situation. However, the economic policies pursued by the Angolan government have aggravated the effects of war. For example, the overvalued currency and distorted price system have helped buttress the isolation of the rural areas caused by the military conflict.
It was increasingly clear that the Angolan government had to do something drastic in the field of economic policy. But it was also apparent that the government had difficulties in implementing reforms. Since the creation of the SEF (Programa de Saneamento Económico e Financeiro) in 1987, a couple of policy packages had been announced but never implemented. Several policy packages had been discussed with the international financial community, the World Bank and the International Monetary Fund (IMF). Broad agreement had been reached regarding what should be done.
At the end of September 1990 the government announced a strong reform programme which was aimed at stabilizing the economy. The aim of this article is to present Angola’s economic situation as of September 1990, to discuss the economic policy alternatives open to the government at that time, and to asses the possible outcome of the recently-introduced policy package.