| Summary: | This Selected Issues paper describes external balance assessment in Angola. Angola’s external balance appears sustainable under current assumptions regarding the evolution of oil prices and output/exports, but the economy’s lack of diversification implies that it remains highly vulnerable to declines in the oil price and disruptions in oil production. Moreover, to the extent that the commercial viability of future oil production from the pre-salt deposits is still uncertain, risks to oil output are on the downside. Given the high pass-through of the nominal exchange rate to prices, improving competitiveness should focus on measures to improve the country’s business climate and infrastructure. The assessment of reserve adequacy shows that international reserves are currently adequate for precautionary purposes, but the high (although declining) level of dollarization in the financial system implies that a higher benchmark is appropriate; staff sees limited scope for drawing down reserves
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