| Summary: | The oil price shock that started in mid-2014 has substantially reduced fiscal revenue and exports, with growth coming to a halt and inflation accelerating sharply. This has brought to the forefront the need to address more forcefully vulnerabilities and dependence on oil, and to diversify the economy. The authorities have taken steps to mitigate the impact of the external shock: an 18 percent of GDP improvement in the non-oil primary fiscal balance over 2015-16, mainly through spending cuts including the removal of fuel subsidies, has been implemented; and the kwanza has been devalued against the U.S. dollar by over 40 percent since September 2014, with international reserves being used to smooth the depreciation. However, the exchange rate has been re-pegged since April 2016 leading to an appreciation of the kwanza in real terms, and further policy actions are needed to continue adjusting the economy to the ‘new normal’ in the oil market and to return growth to a level consistent with poverty reduction
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