Repor No. 8964-ANG!- .. ' '

AngolaTrade, Price, and Wage ReformJune 20, MI9

C,ountry Operations DivisionSouth Central and Indian Ocean DepartmentAfrica Relgion

FOR OFFICIAL USE ONLY

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CURRENCY EQUIVALENT(as of March 31, 1991)

Currency Unit - NoW Iwanza

Official Rate: US$1 = NKz 60.00

FISCAL YEARJanuary 1 - December 31

FOR OFFCIAL WI ONLY

ANGOLA

TRADE, PRIC AND WAGE REFORM

County Operatla ivsOM"ouhCmin"a ad ndian Oean Department

Aftm ROOiM

This rport i basd on te fidins of an economic mission tat visised Angola in November/D ber 1990.Mision members wele Cais Elbirt (mission eade), Hecwt Avi4, Mawa Taa Benio. Roa Castro, PerPall, Daie Kaufa, and Lob Ptere da Silva. With a tion of Hecor Avila (con_aa), all areWod Bank staff membem Th fepo wa dicusd with th Ansolat in Februay 1991.

Thi docuent hw a rsid distributio and may be ud by rcpients only In the pfomeof their cal dutisu Its contents may not othwise be lod withot Worldnk authorition.

COUUTD DAT& .*.......... ..... .... .... ...... vij

WMt0UH* 8T Y .*........................... ix

CRWTR I TJRDAID ERGM ........ ... .. ... .. ..... . 1

I. A SIMPLIFIED ANALYSIS OF THE TRADE REGIME IN AFRICA . . . . . . . . 1

II. THE ANGOLAN TRADE REGIME . . . . . . . . . . . . . . . . . . . . . . 3A. External Trade . . . . . . . . . . . . . . . . . . . . . . . . . 4

1. Foreign Exchange Allocation System . . . . . . . . . . . . . 42. Structure of Imports . . . . . . . . . . . . . . . . . . . . 73. The Parallel Market for Foreign Exchange . . . . . . . . . 10

S. Internal Trade .. 101. Price Controls . . . . . . . . . . . . . . . . . . . . . . 112. The Parallel Market for Goods . . . . . . . . . . . . . . 13

C. Other Trade Policies . . . . . . . . . . . . . . . . . . . . . 151. Import Tariffs and Sales Tax . . . . . . . . . . . . . . . 152. Export Restrictions . . . . . . . . . . . . . . . . . . . 16

III. IMPLICATIONS OF THE CURRENT TRADE REGIME . . . . . . . . . . . . . 17A. Costs Associated with Market Distortions . . . . . . . . . . . 17B. Sectoral Impacts of the Trade Regime . . . . . . . . . . . . . 17

IV. THE POLICY IMPLICATIONS AND SUGGESTED OPTIONS FOR REFORM . . . . . 18A. Exchange Rate Unification . . . . . . . . . . . . . . . . . . 18B. Integration of the Internal Market . . . . . . . . . . . . . . 19C. Complementary Measures ........ .. ... .. .. .. . 20

ANNEX 1 DETERMINING PRICES IN THE PARALLEL MARXET . . . . . . . . . . . 21A. General Conclusions . . . . . . . . . . . . . . . . . . . . 21B. "Nontradable" Imported Fixed-Supply Goods . . . . . . . . . 21C. Tradables ......................... . 22

QWMAM 2 PUXC TIMM= . . . . . .... ......... .. .. . 24

I. AN OVERVIEW OF THE PUBLIC SECTOR . . . . . . . . . . . . . . . . . 24

II. THE BUDGETARY ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . 25

III. MEASUREMENT OF BUDGETARY OPERATIoNS . . . . . . . . . . . . . . . 25

IV. THE BUDGET DEFICIT, EXCHANGE RATE, AND PRICES . . . . . . . . . . 28

V. a CONSOLIDATED ACCOUNT FOR THE 13 LARGEST PUBLIC ENTERPRISES . 32A. Public Enterprises in Angola . . . . . . . . . .. . . . . . 32B. A Consolidated Account for the 13 Largest Parastatals . .. 34

1. Production, Employment, and Investment . . . . . . . . . . 352. Revenues, Expenditures, and Transfers . . . . .35

C. Measuring Real Resources Mobilization for the13 Largest Parastatals . . . . . . .37

D. Effects of Policy Changes on Parastatal Accounts. 3-

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ANNEX 2.A INSTITUTIONAL ASPECTS AND DESCRIPTION OF THE BUDGET . . . . . 43A. Budget Formulation, Execution, and Control . . . . . . . . . . 43B. Revenues, Expenditures, and Financing . . . . . . . . . . . . 44

1. Revenues . . . . . . . . . . . . . . . . . . . . . . . . . 442. Expenditures .... . . . . . . . . . . . . . . . . . . . 453. Financing . . . . . . . . . . . . . . . . . . . . . . . . 46

C. Extrabudgetary Operations ... . . . . ... . . . . . . . . 47

ANNEX 2.B ANJ "ADJUSTED" BUDGET AND THE EXCHANGE RATE . . . . . . . . . . 48

ANNEX 2.C THE GOVERNMENT BUDGET AND THE EXTERNAL ACCOUNTS . . . . . . . 49

ANNEX 2.D THE INSTITUTIONAL RELATIONS BETWEEN THE CENTRALGOVERNMENT AND THE PUBLIC ENTERPRISES . . . . . . . . . . . 51

ANNEX 2.E METHODOLOGICAL ISSUES REGARDING THE CONSOLIDATEDPARASTATAL ACCOUNTS ... . . . . . . . . . . . . . . . . . 52

CHAPTUR 3 RZMONZTIXASIO= OF INCOMES IN TBH FORMAL SCIOR . . . . . . . . 53

I. LABOR FORCE AND THE FORMAL SECTOR IN ANGOLA. .. . . . . . . . . 54A. The Formal Sector Labor Force ... . . . . . . . . . . . . . 54B. The Remuneration System . . . . . . . . . . . . . . . . . . 56C. Economic Consequences of the Present System . . . . . . . . . 59

II. REMONETIZING INCOMES . . . . . . . . . . . . . . . . . . . . . . 60A. The Economic Advantages of Remonetization . . . . . . . . . . 60B. Wage Remonetization Parameters ... . . . . . . . . . . . . . 61C. The Estimates ... . . . . . . . . . . . . . . . . . . . . . 62

III. THE POLICY IMPLICATIONS OF REMONETIZATION . . . . . . . . . . . . 63A. Impact of Remonetization on the Public Sector Fiscal

Deficit: A Simple Accounting Framework . . . . . . . . . . 64B. Preparing for Remonetization ... . . . . . ..... . . . . 66C. Other Possible Policy Implications of the Remonetization . . . 69D. A Suggested Sequencing for Remonetization . . . . . . . . . . 70

1. A Two-Stage, Top-Down Approach . . . . . . . . . . . . . . 702. Estimates of the Financial Shift from Remonetizing

Two Entitlements . . . . . . . . . . . . . . . . . . . 71E. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . 71

ANNEX 3 AN ACCOUNTING FRAMEWORK FOR THE ANGOLAN ECONOMY ANDTHE REMONETIZATION ... . . . . . . . . . . . . . . . . . . 74

A. The Model ... . . . . . . . . . . . . . . . . . . . . . . . 74B. Monetization of This Economy ... . . . . . . . . . . . . . . 75

T!SPLS

1.1 Key Economic Indicators in Selected Sub-Saharan AfricanCountries, 1982 . . . . . . . . . . . . . . . . . . . . . . . . . 3

1.2 Matrix for Analysis of the Angolan Foreign ExchangeAllocation System ....................... . 5

1.3 Per Capita GDP and Imports in Selected African Countries,1987 and 1988 ......................... . 8

1.4 Official Foreign Exchange Allocation for NoncapitalImports, 1985-90 ........................ . 9

1.5 Parallel Market Exchange Rate in Luanda, 1984-89 . . . . . . . . . 111.6 Official Retail Prices and World Prices for Selected

Goods, 1980, 1985, and 1989 .................. . 14

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1.7 Parallel Market Prices for Selected Products, Luanda,1985and1989 .... . . . . . . . . . . . . . . . . . . . . . 16

2.1 Central Government Finances, 1967-89 . . . . . . . . . . . . . . . 262.2 1989 Budget Including Extrabudgetary Expenditures . . . . . . . . 272.3 Foreign Exchange Component of Central Government

Expenditures, 1989 Budget . . . . . . . . . . . . . . . . . . . 282.4 Government Revenues at Parallel Prices, 1989 . . . . . . . . . . . 292.5 Government Expenditures at Parallel Prices, 1989 . . . . . . . . . 302.6 Adjusted Government Deficit, 1989 .. 312.7 Structure of "Adjusted" and "Nonadjusted" Budgets, 1989 . . . . . 312.8 Enterprises by Size and Type of Ownership, 1989/90 . . . . . . . . 332.9 The 13 Largest Public Enterprises, 1989 . . . . . . . . . . . . . 342.10 Consolidated Nonadjusted Account for 13 Parastatals, 1986-90 . . . 382.11 Consolidated Nonadjusted Account for 13 Parastatals

by Economic Sector, 1986-90 . . . . . . . . . . . . . . . . . . 392.12 Consolidated Nonadjusted Account for 13 Parastatals

by Economic Sector, 1986-90 . . . . . . . . . . . . . . . . . 402.13 Consolidated Nonadjusted Account for 13 Parastatals, 1986-90 . . . 412.14 A Simulated Consolidated Account for the 13 Largest

Parastatals, 1986-90 . . . . . . . . . . . . . . . . . . . . . . 422.15 Central Government Revenues, 1987-89 . . . . . . . . . . . . . . . 442.16 Central Government Expenditures, 1987-89 . . . . . . . . . . . . . 462.17 Central Government Deficits and Financing, 1987-89 . . . . . . . . 472.18 Dollar Component of the Government Budget, 1989 . . . . . . . . . 493.1 Total Population and Economically Active Population in the

Formal and Informal Sectors, Selected Years, 1980-90 . . . . 553.2 Sectoral Breakdown of the Labor Force in Angola,

Mozambique, and Central Africa . . . . . . . . . . . . . . . . . 563.3 Breakdown of the Formal Sector Labor Force by Occupational

Category, 1988-89 .. 573.4 Valuation of Basic Entitlements at Official and Parallel

M-arket Prices, 1984 .. 633.5 Remonetized Monthly Wages of Formal Sector Workers

by Occupational Category, 1989 .. 643.6 Remonetized Monthly and Annual Wage Bill in the

Formal Sector by Occupational Category, 1989 . . . . . . . . . . 653.7 Total Annual Wage Bill in 1989 Including the Military

Under Both Systems of Remuneration .. 663.8 Structure of Wage-Related Expenditures in the

Central Government Budget, 1989 .. 673.9 Suggested Sequencing for the Remonetization of Managers'

and Technicians' Salaries .. 723.10 Examples of Salary Increases for Managers and Technicians . . . . 733.11 The Financial Implications of a Partial Remonetization for

Managers and Technicians .73

Statistical Appendix Tables

1. Retail Official and Parallel Market Prices, Luanda . . . . . . . . 792. Composition of Importse 1985-1988 .. 803. Taxes on Petroleum Sector .. 814. Central Government Employment and Salaries, 1988 . . . . . . . . . 84S. Foreign Exchange Component of Central Government Expenditures . . 856. Debt Service as of 31/12/88 .. 867. Balance of Payments, 1987-90 .. 878. Population, Economically Active Population, Formal

and Informal Sector . . . . . . . . . . . . . . . . . . . . . . 889. Breakdown of the Labor Force by Economic Sector, 1988 . . . . . . 8910. Formal Sector Civilian Employment, by Region and by Sex . . . . . 90

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11. Population, 1900-86 . . . .*. 9112. Economically Active Population by Economic Sector, 1985 .i . . . . 92

Annex Thirteen State Enterprise Accounts ... . . . . . . . . . . . . . 93

A.1 General Case: Market Equilibrium under Import Rationing . . . . . 21A.2 Market Equilibrium with Diversions from Official

to Parallel Markets . . . . . . . . . . . . . . . . . . . . . . 22A.3 Market Equilibrium with Liberal Windows . . . . . . . . . . . . . 232.1 Volume of Production, 1980-89 ... . . . . ... . . . . . . . . 352.2 Total Parastatal Revenue by Sector, 1986-89 . .. . . . . . . . . 352.3 Total Parastatal Expenditures by Sector, 1986-89 . .. . . . . . . 362.4 Net Transfers from Parastatals to the Government, 1986-89 . . 363.1 Sectoral Breakdown of the L&!'or Force, 1988 . .. . . . . . . . . 563.3 Occupational Breakdown in the Formal Sector, 1988 . .. . . . . . 573.3 Components of Employee Remuneration, 1988-89 . .. . . . . . . . . 593.4 Monthly Income by Occupational Category, 1988-89 . .. . . . . . . 61

1. Angola

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roOUffR DM Anoa

Area (thousasnd of square kiloMute.) 1,276.7

population (1989)(million) 9.7Rate of growth since 1980(percent) 2.7

Population density (1986)(per square kilometer) 7.0

Population characteristics (1980-85)Crude birth rate (per 1,000) 47Crude death rate 'per 1,000) 22

Inaonm distributionPercent of national incomeHighest quintileLowest quintile

Nutrition (1980)Calorie intake as percent ofrequirements 87

Per capita protein intake(grams/day)

Health (1986)Population per physician 15,521Population per hospital bed 634Infant mortality (per 1,000live births) 160

Access to safe watex (1985)(percent of population)

Urban 80Rural 15

Access to sewerage (1985)(percent of population)Urban 26Rural 16

HneWgy consumption per capita (1986)(kilograms of oil equivalent) 299

Education (1985)Adult literacy rate (percent) 28Primary school enrollment (percent) 44

Gross dometic product(1989 in US$ millions)GDP at market prices 7.4MNP per capita (US$) 620InvestmentGross domestic savingsResource balance 735Exports of goods and

nonfactor services 3,151Imports of goods and

nonfactor services 2,416

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Costrl gove et f5iaaa 1969 percent(billions of kwanzas) 1987 1988 budget of =1 (1969)

Current revenue 62.9 73.3 81.1 36.5Current expenditure 76.4 79.2 89.1 48.1Current surplus -13.5 0.1 -8.0 -3.6Capital expenditure 11.0 16.4 20.1 9.1

Money and credlt(billions of kwanzas) 1984 1985 1986 1987 1988

Money and quasi-money 172 204 220 257 313Bank credit to centralgovernment 118 130 187 247 297

Other bank credit 97 113 78 54 53Money as percentof GDP 89.0 101.0 112.5 113.6

Annual percentage changesin Bank credit to centralgovernment 48.7 10.1 43.6 32.2 20.0

Other bank credit -10.9 15.2 -30.7 -30.4 -2.9

Balance of payment. 1984 1985 1986 1987 1988 1989

Exports (goods andnonfactor serviceo) 2,129 2,344 1,406 2,409 2,606 3,151

Imports (goods andnonfactor services) 2,058 1,928 1,543 2,159 2,181 2,416

Resource balance 71 416 (137) 614 36 735Net factor income (314) (329) (370) (218) 538 -751official transfers (net) 26 20 139 52 32 -4Current accountbalance (217) 107 (368) 448 -470 -20

Public medium- and long-term borrowing (net) 173 171 7 (55) -199 -155

Other 101 (260) (283) -834 -256 -754Change in reserves

(- increase) (57) (18) 78 -17 -49 6Gross official reserves

(end of period) 240 257 279 190 239 233

major m An ezpots(average 1984-88)

U#$ nllion vercet

Crude oil 1,601 87.4Refined oil 73 3.5Liquefied petroleum gas 27 1.3Diamonds 85 4.1Coffee 52 2.5other 23 1.1

Total 2,062 100.0

Uzternal debt, Decombes 31, 1989Total outstanding and disbursed(US$ billions) 6.3

Debt sevice ratio (1987)Total outstanding and disbursed(percent) 21.9

.. Indicates that data are not available.

ZXKCUTZEr su_am

2.. This report complements an earlier report prepared by the Bank asExecuting Agency for the U.N. Development Pro'wram (UNDP) {"Angola: AnIntroductory Economic Review," No. 7408-ANG, June 1590). It is intended as ananalytical and policy "tool-kit" for use by the government in its ongoingreflection on viable economic policy refore options. Accordingly, it emphasizesthe "how" as well as the "what, " through the application of detailed methodologyand several technical annexes (which are appended to each chapter forconvenience). However, it is important to stress that not all analyticalfindings and methodological suggestions necessarily imply policy recommendations.As repeatedly stated in the report, the key polioy reforms should not be takenin isolation, but as part of a coherent policy package. Policy reform isespecially important and has become more feasible as a result of the ce&sefireand the signing of the Bitoril poace accords on May 31.

2. Angola is the third largest country south of the Sahara. It has apopulation of about 10 million, growing at a rate of about 2.7 percent a year,and a low density of 7.2 inhabitants per square kiloeter. The country is veryrich in natural resources (especially oil and diamonds) and arable land.However, Angola has suffered from armed confliet for decades, first in thestruggle for independence and subsequently in a long and destructive civil war.

3. The development of the Angolan economy accelerated considerably afterWorld War SI. It was stimulated initially by a coffee boom, which made Angolaone o0 the world' a four main coffee exporters by 1974. The most spactaculardevelopment was that of oil production, which started in the late 1950s andreached 144,000 barrels a day in 1973. The favorable economic opportunitiesattracted thousands of Portuguese settlers, whose number increased from 40,000in 1940 to 340,000 in 1974. A large propo-tion of the rural population wasmployed in the plantations, mines, and factories either voluntarily (at very lowwages) or under a system of forced labor, which was abolished only in 1961.Despite positive economic developments, the vast majority of Angolans continuedto live in poverty and social indicators remained extremely low.

4. Disruptions created by the armed struggle and the exodus of thePortuguese settlers during the transition to independence in 1975-76 led to adecline in productive activities. The oil industry, an economic enclave, anddiamond mining have been the only important exceptions to the general economicdecline. By early 1991, oil output had reached about 460,000 barrels a day. Oilexport revenues, comprising over 90 percent of total export revenues, andequivalent to about US$300 per capita, provide the foreign currency needed forimports of war materiel, production inputs, food for the urban population, andother consumer goods.

5. The poor performance of the nonoil economy is explained largely by threefactors. First, the war has created insecurity, destroyed economic and socialinfrastructure, imposed a heavy burden on the economy, and created enormoussuffering and deprivation among the population. The second factor is the chaoscreated by the massive exodus at ndependence of about 300,000 Portuguesesettlers (90 perc)nt of the total) who held practically all skilled jobs.Despite the progress made by Angola in education, the scarcity of trainedpersonnel continues to be a major constraint to economic development. The thirdfactor - and the subject matter of this report - is the inappropriate economicpolicies, which have contributed significantly not only to the poor performanceof the nonoil economy, but also to inequalities in income distribution. Withoutthe contribution of expanding oil production, the economic crisis in Angola would

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have been even more serious. The resulting dualistic development of the economyhas been reinforced by rigid economic management and policies.

6. In May 1991, the government and UNITA (the main opposition force) agreedto a ceasefire as a preliminary step to an overall political settlement andmultiparty elections in 1992. Thus, for the first time in decades, the prospectsfor an end to war and for a permanent political settlement of the Angolanconflict are good. This will permit the country to move toward rehabilitationand economic recovery. At the same time, it increases the importance ofimprovements in economic policy.

The ecomsoic Policy P:oblei

7. The economic policies implemented since 1975 have not been conducive todevelopment. The authorities maintained expansionary fiscal and monetarypolicies while freezing producer and consumer prices, nominal wages, and theexchange rate at artificially low levels. This created large and mountingexternal and internal imbalances. The price and wage freeze has encouraged theemergence and steady growth of parallel markets and has constituted a strongincentive to divert resources from the official to the parallel economy. In anattempt to protect the real incomes of formal sector workers, the governmentintroduced a system of purchasing rights at official prices, which constitutesa substantial part of wages. The large currency overvaluation has resulted ina virtual elimination of all exports except oil and diamonds, a heavy dependenceon imports, and an ^conomy in which rent-seeking probably constitutes the mostimportant activity in urban areas. The economy of Angola is characterized byextreme price distortions across the board. The official exchange rate is oneone-hundredth of the parallel one, and parallel prices are 20 to 100 timesofficial prices.

8. Recognizing that Angola's economic distortions and imbalances are duein large part to inappropriate economic policies, the government announced aprogram of Economic and Financial Restructuring (SEF) in 1987. The proposedreforms included (1) a limited adjustment of the exchange rate, which would stillhave left a wide margin between the official and the parallel exchange rates; (2)a reduction in the budget deficit and a corresponding reduction in inflationaryfinancing; (3) a program for restructuring public enterprises through divestitureand liquidittions; (4) reform of the financial sector by encouraging theestablishment of private commercial banks and ensuring greater availability ofcredit to the private sentor; and (5) a cutback in price controls to selectedessential goods only.

9. While the proposed reforms were in the right direction, the measuresgenerally did not go far enough to address the main structural distortions,notably in the area of the exchange rate. In any event, with the exception ofa more accommodating attitude toward parallel market activities, there has beenlittle progress to date in implementing the program. Since 1988, several lawshave been adopted to provide a broad framework for structural reform, but mostof them have not been applied. A new package of measures, including a 100-percent devaluation combined with wage increases and price liberalization, wasannounced in early 1990 as part of a New Action Plan. The exchange rateadjustment, however, was postponed for over a year and the decontrol of mostprices is yet to be implemented.

10. A currency reform in September 1990 (creation of a new currency and tightlimits on convertibility from the old currency) temporarily brought dcwn priceson the parallel market. However, this attempt to reduce excess liquidity provedunsustainable. On the contrary, the experience of this "reform" furtherundermined the already shaky public confidence in the government's management ofthe economy. In early 1991, inflation was accelerating and the gap betwsenofficial and parallel exchange rates again widening to almost the range thatexisted before the currency reform. Yet another attempt to put forth a moreconsistent and comprehensive set of stabilization measures was made recently, aspart of the annual plan for 1991. While reaffirming the government's commitment

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to adjustment and reform, this plan still does not represent the kind ofcomprehensive and credible package of reforms needed to address the fundamentaleconomic distortions of the Angolan economy. For example, the 100-percentdevsluation implemented in March 1991 is insufficient to address the substantialovervaluation of the new kwanza.

The Overall Peramective

11. The complexity of Angola''s political economy and the degree of distortionmake this economy an unusual case for reform. Although the general menu ofpolicy changes is well-known (trade liberalization, devaluation, priceliberalization), and the associated fiscal and monetary policies aretheoretically well-established, the scope and pace of change in this poor, war-ravaged economy remain to be ascertained. On the one hand, the prospects foreconomic growth are substantial, given the rapid supply response that one canexpect in some sectors (agriculture, services); on the other, the inertiaresultinq from both the lack of management experience and the vested interestsassociated with the current distortions is a considerable obstacle to rapid,radical change.

12. Three crucial policy areas need to be addressed: trade and pricing,public finance, and wage remonetization. Concerning the first, the "IntroductoryReview Report" made clear that fundamental price distortions in Angola arereflected in the extreme segmentation of markets for goods and foreign exchange.Knowledge of the foreign exchange allocation regime and the relationship betweenofficial and parallel markets is still insufficient. Concerning public finance,the need for a better understanding of the public sector was considered crucial,given the preponderant role of the government in the economy and in anyprospective adjustment, *.he importance of the parastatal sector, and thedistorted and unreliable statistics. In view of the magnitude of the task andthe scarcity of data, the report focuses on the central government and someselected public enterprises, emphasizing measurement problems in a highlydistorted economy as a starting point for formulating policy prescriptions.Finally, the importance of wage remonetization is underlined by the fact that theofficial economy is governed basically by coupons and buying rights, with thelocal currency playing a minor role. The need to understand this system i3overriding.

13. This report's focus on economic policy reform does not mean, of course,that Angola's development will not also require a stable and peaceful climate,rehabilitation of infrastructure, and institutional capacity building. On thecontrary, these are intertwined, and sustainable development will require all ofthem. Correction of price distortions will principally involve movements in theexchange rate, price liberalization, and a concomitant remonetization of wages.These measures will have to be complemented by sound fiscal and monetarypolicies.

The 1ocus of AMIstuUnt

14. As noted, the central focus of policy adjustment in Angola should be theelimination of price distortions. This would automatically improve theutilization of oil revenues and could generate a significant supply response inthe tradables sector. Economic distortions in Angola have had a negative impacton resource allocation and income distribution. Policy reform should thereforeaim at market integration (rejoining official and parallel markets), economicrestructuring (rebuilding the nonoil economy), macroeconomic stability(controlling inflation, avoiding sharp fluctuations in incomes), and theprotection of vulnerable groups (maintaining some protection for formal sectorworkers through entitlements, implementing other measures to protect informalsector workers). Within this framework, a reform package will have to includeradical adjustment of the exchange rate, prices, and wages. This will inevitablyhave budgetary and monetary implications.

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15. Given the degree of currency overvaluation, there is no escape from amajor exchange rate adjustment, which should be directed at the eventualunification of the foreign exchange markets. This would allow the introductionof an open generalized licensing (OGL0 system for imports, thus eliminating theadministrative allocation of import licenses and foreign exchange. A competitiveexchange rate is also crucial to provide adequate incentives for nontraditionalexports, particularly in agriculture. An OGL system would improve access toinputs by productive sectors. In addition, the exchange rate adjustment wouldsubstantially reduce rent-seeking activities and corruption.

16. Price liberalization and the removal of controls also will be crucialfor market integration. This process would need to be accompanied by theintroduction of competition in the distribution network. In Angola, priceliberalization need not be inflationary; provided appropriate fiscal and monetarypolicies are in place, prices may even fall. If a decline in real wages iswarranted by macroeconomic conditions, it could be implemented simultaneouslywith wage remonetization. In the course of implementing a wage remonetization,it may be desirable to maintain some basic buying rights (cartaos) for a time forthe poorest sectors of the society, to provide a safety net.

The Pace of Mdustasnt

17. The process of economic adjustment would require the adoption of a wide-ranging set of measures at the institutional, macroeconomic, and sectoral levels.The macroeconomic adjustments (prices, exchange rates, wage remonetization,fiscal and monetary policy) must provide an appropriate incentive framework forimplementing sectoral reforms and should therefore proceed rapidly. Sectoral andinstitutional changes (public enterprise reform, privatization of public sectorassets, financial sector reform) would take longer in most cases. Although thisreport focuses largely on prices and wages, this should not be interpreted asminimizing the crucial importance of other sectoral and institutional changes,some of which are currently being addressed by the authorities.

18. Some measures should proceed more rapidly than others, but it is stillessential to take a global, synchronized approach. For example, institutionalchanges such as the redefinition of property rights should accompanymacroeconomic adjustments if the expected economic response is to materialize.Since comprehensive and radical changes such as those required by Angola demandconcerted societal efforts, the pace of adjustment will be affected by politicaland social factors and by institutional capacity. Measures that consolidatepolitical support, minimize transition costs, and economize on scarce managementskills should clearly be taken as rapidly as possible; measures that requireconsensus building, have high transition costs, or require institutional support,may be paced accordingly.

19. The macroeconomic adjustment could conceivably begin with gradual steps,to "test the waters" and gather more information about the direction and responseof the economy to policy adjustments. once there is more confidence in themanageability of the process and the differential between the official andparallel markets has been narrowed, the authorities could decide to complete theadjustment rapidly, with sharp changes in prices, including the exchange rate andwages.

20. Experience has proven that the main phase of adjustment should proceeddecisively and be completed in a relatively short period of time; otherwise,initial gains might be eroded. Partial adjustments usually require specialincentives to establish, in advance, the general trend intended for the economy.For example, to encourage exports and to promote efficient import-substitution,a competitive foreign exchange "window" or other market-type mechanism could beintroduced. However, such partial adjustments could present some complicationsthat a faster pace would not. Enterprises with access to a window shouldprobably operate with fully liberalized prices and remonetized wages, as if theywere part of the parallel, or fully liberalized, economy. Furthermore, the linksbetween enterprises operating under a fully liberalized price regime and those

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continuing to operate under official prices might be disrupted. Thesedisruptions will be minimized, however, if rapid and continued movements takeplace to narrow the gap between the official and parallel markets. The dangerof miscalculating wage increases is less intense in this type of program.Similarly, the monetary implications of wage remonetization appear moremanageable. Various options associated with the sequencing and pace of wageremonetization are discussed in more detail below. In any case, whethersimultaneous or sequential, rapid or gradual, effective adjustment requirese.;plicit consideration of the linkages between different policy measures.

the Key Policy likacaes

21. The following general possible scheme emerges from the linkages amongthe key variables. An immediate adjustment of the official exchange rate to amarket-clearing level (through, say, an auction system or a managed exchangerate) will have to be accompanied by generalized price liberalization.Simultaneously, wages should be remonetized and, if required by the macroeconomicsituation, reduced in real terms. An adjustment path that corrected prices,exchange rate, and wages at the same time would rapidly improve resourceallocation. However, it would require simultaneous adjustments in prices andwages of a magnitude that could be difficult to manage. Given the extent of thedistortions, there is a cLanger of miscalculating wage adjustments in the processof remonetization, thereby generating excess demand and inflationary pressures.A major uncertainty is the level at which liberalized prices will settle, sincethat will determine the parameters for wage remonetization. The response ofpublic enterprises to the new measures is also a major issue since theseenterpri3es are initially the main economic agents for the transmission of suchliberalization throughout the economy. Finally, for the program to besuccessful, these drastic adjustments in prices will need to be accompanied byappropriate monetary and fiscal policies. Credit policy and the level of themonetary aggregates should be consistent with wage policy, including the effectsof remonetization, and with the inflation and balance of payments objectives.

22. Consequently, among the variety of linkages between policy variables,three key linkages are most important in Angola: between the exchange rate andprices, between prices and wages, and between wages and monetary policy.

23. The exchange rate-price linkage: In Angola, exchange rate liberalizationrequires price liberalization, but the opposite is not necessarily true. It ispossible to proceed more expeditiously with liberalizing prices than the exchangerate system. However, if the exchange rate is fully liberalized, prices shouldbe liberalized and wages should be totally remonetized as well.

24. The price-wage linkage: Wage remonetization should proceed in line withprice liberalization. If prices are totally liberalized, full wage remonetiza-tion should be implemented. If prices are not fully liberalized, wages shouldbe adjusted only to compensate for movements in official prices, and wageremonetization will also be taking place gradually. When official and parallelprices are unified, purchasing rights become irrelevant, and remonetization hasbeen achieved. In a gradual approach, there are other options for remonetizingwages.

25. The wage-monetary policy linkage: A monetary policy consistent with wageremonetization is yet to be determined. The key empirical issue here is theextent to which the replacement of purchasing rights at official prices by moneyat market prices will lead to an expansion in money supply and what furtherimpact this might have on the market price level. As these measures would beimplemented in a coherent context of far-reaching adjustment, the overalleconomic climate and confidence in the currency would be positively affected.Hence, money velocity would most probably slow down (as it tends to do incountries undertaking a serious adjustment effort), and the inflationary impactof wage remonetization is difficult to predict.

- xiv -

!he Main Findihas and golIlc Recommendations

26. Trade and Prices. The mechanism of foreign exchange allocationconstitutes the key determinant of the economic situation in Angola. A notablefeature of the trade regime in Angola (as in other countries with overvaluedexchange rates) is that the foreign exchange allocation system has allowedrelatively liberal access to foreign exchange at the official exchange rate tocertain individuals and institutions regardless of types of products, while aresidual is subject to strict quantitative restrictions. This system, madepossible by the oil revenues, has resulted in heavy reliance on consumer importsto the detriment of domestic production of both importable and exportable goods.

27. Another feature of Angola's trade regime is the existence of "own-funds"imports. One window is provided by the access to extremely cheap air fares,which allows Angolans to travel abroad and purchase imported goods which theyresell at parallel market prices. Another own-funds imports window operatesthrough the duty-free shops, where customers may buy imports with dollarsobtained outside official channels. Given the distorted trade and pricingregimes and the lack of an appropriate business environment, the own-funds markethas a proconsumption bias. The coexistence of liberal windows that channel duty-free consumer imports into the parallel market and strict quantitativerestrictions on inputs strongly suggests that effective protection is negativefor several industries.

28. Internally, price controls are linked with consumption rationing and wagepolicy. As noted earlier, the most important component of formal sector wagesis paid in the form of buying rights. Although official prices are supposed toapply to all goods and services other than fruits and vegetables, in practiceparallel prices prevail and determine consumption patterns in Angola.Particularly because the large oil surplus is allocated at the official exchangerate, the resource misallocation is substantial. At the micro-level, rent-seeking activities divert resources from productive activities and encouragecorruption. In addition, the volatility of relative prices in the parallelmarket discourages potentially productive activities. Nevertheless, parallelmarkets have helped, particularly in urban areas, to alleviate the distortionscreated by the official market, have acted as a safety valve to reduceinefficiencies generated by the administrative system, and could be important infacilitating policy adjustment.

29. Consequently, income distribution is characterized by the gap betweenthe urban formal sector and the rest of the country. Workers in the urban formalsector have access to buying rights and therefore to subsidized imports, whilethe remaining great majority of the population (rural and informal urban) areeffectively left outside the system.

30. Public Finance. The public sector comprises the government and about500 state enterprises. This report focuses on the central government and somemajor enterprises for which data are available. To obtain a clear fiscalpicture, it is necessary to transform revenues and expenditures into parallelmarket prices. If GDP is also measured at market values, the government deficitfor 1989 is estimated at about 12 percent of GDP, compared to 22 percent whenmeasured at official prices. In the case of public enterprises, the consolidatedaccount of the 13 largest shows an operating surplus of 7 percent of GDP atofficial prices, but just one percent at market prices. Little is known aboutthe other parastatals, but it is likely that they are incurring losses.

31. If the substantial deficit is to be reduced, the wage bill and militaryexpenditures would need to be cut, since together they constitute about 50percent of total expenditure.

32. Wage Remonetization. The most important components of income in theformal sector are buying rights that provide access to goods at low officialprices. Buying rights are therefore instruments of rationing associated withpresent pricing policies, aimed primarily at protecting the real incomes of

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formal sector workers. Wage remonetization would entail replacement of allbuying rights with their money equivalent. As a broad order of magnitude, abudget-neutral remonetization of wages using parallel market prices would requiresalaries to be multiplied by a factor of 25 for managers and 13 for unskilledworkers.

33. It should be made clear that remonetization is a relevant issue only forthe 800,000 people in the formal sector; the other 9 million Angolans wouldremain relatively unaffected. In addition to its other advantages, wageremonetization would reduce the high transaction costs in the present system andmake the existing wage structure more transparent, thereby allowing coherent wagepolicies to be formulated and implemented. Carrying out the remonetization willrequire improvement of the statistical base on formal' ployment, elaboration ofa reliable retail price index, and improvement of payment procedures. Thelinkage with price liberalization for parastatals will require attention as well.

34. The main analytical findings and recommendations are summarized below.

MAIN ANALYTICAL FINDINGS AND POLICY RECOMMENDATIONS

Trade and prices Public finance Wage remonetization

Changes in official For accurate measure- Buying rights areprices will not nec- ment, public sector instruments of incomeessarily cause accounts must be re- distribution.changes in parallel formulated using aprices. common numeraire. Wage remonetization

would affect only thePrice controls should Revaluation of the formal urban sector.be eliminated for all budget using marketnonofficial activi- prices leads to a Wage remonetizationties. lower deficit than would reduce transac-

the official figure. tion costs, improveCompetition should be transparency, andintroduced in the Revaluation of the facilitate incomesdistribution network. parastatal accounts policy.

using market pricesLicensing procedures leads to a lower sur- To fully remonetizefor new business plus than the off i- present incomes, sal-should be sioplified. cial figures. aries should be mul-

tiplied by a factorPrivileged access to Exchange rate devalu- of 25 for managersforeign exchange and ation will lead to an and 13 for unskilledthe operation of the improvement in the workers.de facto system of recorded government"own-funds" imports finances and a wors- Remonetization shouldgenerate a strong ening of parastatal be synchronized withproconsumption bias. sector finances. price liberalization.

Effective protection Reduction of the def- As a safety net, someis negative for sev- icit will require buying rights coulderal industries. some cut in both the be maintained for

wage bill and mili- certain segments ofThe present foreign tary spending. society.exchange and traderegime is regressiveas well as ineffi-cient.

CNATZR 1

Tax TMRDZ flGI3

1.1 Angola's trade regime is characterized by severe distortions that havebeen costly to the country in several ways. They have had negativedistributional effects: access to imported,consumer goods appears to be highlyregressive. In addition, they have had perverse microeconomic effects, includingincentives to rent-seeking activities and a very distorted price structure.Finally, they have had negative macroeconomic effects since the system encouragesimports of consumer goods.

1.2 This chapter describes the salient features of the Angolan trade regime(both external and internal) and derives some policy options for considerationby the Angolan government.

1.3 At first glance, Angola's trade policies appear to be similar to thoseadopted in other African countries since the early 1970s. A gross currencyovervaluation, resulting mainly from inappropriate policy responses to externalimbalances, has been accompanied by the imposition of exchange controls.Internally, these policies have been supported by price controls and consumptionrationing. As a result, parallel activities have developed in both the foreignexchange and goods markets.

1.4 Angola's trade regime deviates from this standard package in oneimportant way: despite the overvalued exchange rate, several types of liberalforeign exchange windows (free of quantitative restrictions) exist. The foreignexchange allocation system allows flexibility to certain institutions (oilcompanies, the army) with regard to the type of products they buy, while theresidual is subject to strict quantitative restrictions (QRs), which areapplicable mostly to inputs. In addition to the inefficient allocation ofresources associated with this system, its distributional implications have beenlargely regressive.

1.5 Given this context, policy changes ought to be guided by four broadobjectives: market integration, economic restructuring of the nonoil sector,protection of vulnerable groups, and macroeconomic stability. Price movements,including those of the exchange rate, are the key to market integration since thesegmentation of markets is a phenomenon associated principally with the pricedifferential between the official and parallel markets. A more appropriateexchange rate policy is crucial to rebuilding the nonoil sector. Protection ofvulnerable groups could be achieved through a remonetization of the wages ofcertain workers in the formal sector, in a way that secures access to basicitems, and through other measures aimed at protecting groups in the informalsector. More study of these issues might be needed. Finally, to attain economicstability, inflationary pressures and sharp real income fluctuations will needto be avoided during the transition period since they could endanger adjustment.

11.6 This chapter has four parts. Seetion I provides a perspective on traderegimes in Africa from the 1970s to the mid-1980s and places Angola in contextwithin a simplified analytical policy framework. Section II discusses the maincomponents of the Angolan trade regime, focusing on the foreign exchangeallocation system and the roles of the official and parallel markets. SectionIII briefly presents the distri-.utional and economic implications of the traderegime. Section IV proposes elements that could be included in a reform of theexternal and internal trade regimes.

Z. A SHPLIX=3D ANLAYSIS F0 !B 5RD RTGIE Z M__ WRC

1.7 During the late 1970s and early 1980s, the exchange rates for manyAfrican economies became increasingly overvalued. This overvaluing usuallyresulted from inadequate macro-policy responses to external shocks (such as

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commodity price fluctuations) and to deep-rooted structural problems (such as aweak export base) associated with inflationary budgetary and monetary policies.The reluctance to use the exchange rate as a corrective policy measure eventuallyled to balance of payments problems and ever greater currency appreciation inreal terms. By the mid-1980s, quite large parallel markets had developed in manycountries in which foreign exchange was being traded at a significant premiumover the official rate.

1,8 Once passive exchange rate management was taken as given, the policyresponse to the overvalued official currency was internally consistent in mostcountries, at least in principle. The overvalued currency generated excessdemand for imports at the official rate, which required the introduction of QRs.QRs, in turn, implied that the market could no longer be relied on to allocateresources, and an administrative system of foreign exchange allocation evolved.The overvalued currency and the subsequent administrative allocation of foreignexchange (QRs) meant that potentially large rents and profits were available tothose with access to cheap foreign exchange. Internally, the overvalued currencyand foreign exchange rationing had to be supported by price controls and somekind of consumption rationing. By the late 1970s, most of these policies hadbecome prevalent in trade regimes in Africa.

1.9 Within their well-known limitations (antiexport bias, misallocation ofimports), the "effectiveness" of these restrictive trade regimes varied widely,with correspondingly divergent economic outcomes in different countries.Countries like Kenya, Malawi, and Zimbabwe managed, despite their restrictivetrade regimes, to avoid major and sustained misallocation of resources, and soto avoid a decline in economic activity (Table 1.1). Most probably, this was dueto their ability to maintain the exchange rate overvaluation within moderatelimits and to their relatively strong institutional and civil servicecapabilities. These factors, especially the lower currency overvaluation,translated into better macroeconomic management and less domestic and externalinstability than in other countries.

1.10 At the other extreme, countries like Ghana, Mozambique, and Tanzaniaexperienced unprecedented economic declines from the late 1970s to the mid-1980s,due largely to the severe resource misallocations caused by the exchange rate andtrade regimes. A large overvaluation of the currency implied severe distortionof the overall system of prices and incentives, while weak institutionalcapabilities rendered the centralized allocation of resources totallyineffective. In Tanzania, for example, a firm-by-firm survey revealed that thecentralized administrative allocation of foreign exchange was worse than random:inefficient enterprises benefited disproportionately.

1.11 By the mid-1980s, declining GDPs, balance of payments crises, and highinflation forced some of the worst performers to embark on radical reformprograms. Ghana and Tanzania, among others, dropped many QRs and price controlsand implemented policies that realigned their exchange rate, thereby allowingmarket forces to play a key role in allocating resources. Tanzania embarked ona major program of internal trade liberalization as well. The emerging evidenceindicates that these reform programs are significantly boosting GDP growth andconsumption per capita.

1.12 A more realistic exchange rate regime and internal and external tradeliberalization measures have had a number of implications for foreign exchangeallocation. In Tanzania, for instance, the gradual movement of the officialexchange rate toward more realistic levels has permitted the implementation ofa gradually expanding open generalized licensing (OGL) facility. The OGL allowsany importer automatic access to foreign exchange (at the official rate) toimport any good that has been included on the (expanding) OGL list. Furthermore,since 1984, the government has been implementing a policy of "own-funds" importsthat allows importers to obtain a license to import virtually any good providedthey use their own foreign exchange - and no questions are asked regarding thesource of these funds. The positive impact of this measure alone has beenenormous: imports rose rapidly and so did the availability of critical goods in

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TABLE 1.1 KEY ECONOMIC INDICATORS IN SELECTEDSUB-SAHARAN AFRICAN COUNTRIES. 1982

Annual GDPREERa/ Budget CPI growth

Country (1972=100) deficit/GDP (1972=100) (1972-82)

Group IKenya 102.40 -7.0 379 6.3Malawi 82.36 -8.0 262 4.1Zimbabwe 86.00 -11.0 243 4.3

Group IIGhana 1,252.21 -7.0 730 -2.0Mozambique n.a. -10.1 n.a. -9. oi/

Tanzania 166.86 -9.0 327 1.3

Angola n.a. -22.0 n.a. -0.8

a. Real effective exchange rate: above 100 implies overvaluation of the localcurrency.b. Refers to 1980-86.

Source: Exchange Rates and Parallel Market Economies in Sub-Saharan Africa, WorldBank Staff Paper No 11, IFS; data for Angola are Mission estimates.

rural areas, resulting in a substantial supply response and a tapering of f ofinflationary pressures.

1.13 Mozambique, which has experienced a long period of war similar toAngola' s and also attempted to introduce a centrally planned economy, implementeda major adjustment program somewhat later than Tanzania. Economic growth hasresumed after a long period of economic decline. The main elements of theprogram, launched in 1987, include substantial exchange rate and priceadjustments, which led to a drop in the nominal parallel market exchange ratefrom 1,800 meticals per U.S. dollar in 1987 to 1,250 in late 1988. Unificationof the exchange rate market has not yet been completed, and by end-1989 theparallel rate (at 1,950) was still double the official rate.

11. MM ANGOLA TRDI RGZ_E=

1.14 Angola's trade regime seems to fit within the policy package adopted bymany African countries since the early 1970s. And given the magnitude of itscurrency overvaluation and its institutional and economic management weaknesses,Angola might be said to fall in the category of countries like Ghana, Nozambique,or Tanzania in the early 19809.

1.15 The degree of currency overvaluation in Angola is suggested by theenormous gap between the official and the parallel exchange rate. The officialexchange rate has remained fixed since Independence in 1975, and in April 1991it was 1/100th the parallel rate. By comparison, in Mozambique, the officialrate was about 1/50th the parallel market rate just before implementation of theexchange rate reform, while in Ghana it was 1/20th the parallel rate at the peakof the economic crisis.

1.16 The underlying factor behind the overvaluation of the kwanza has beenthe monetization of large budget deficits, recently estimated at around 20-25

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percent of GDP.1" The Angolan authorities, however, inspired by the principlesof central planning, resorted to administrative controls to contain the pressuresarising from the expansion in domestic demand and the declining trend in thesupply of nonoil products. Thus from the outset, the policy response has beendirect intervention in the allocation of resources, including, among others,foreign exchange rationing (import QRs), price controls on most goods andservices, consumption rationing through the distribution of buying rights thatprimarily benefit formal sector workers in the cities, and centralized controlof internal distribution.

1.17 The acute distortions generated by the overvalued exchange rate and bythe administrative system introduced to deal with the macroeconomicdisequilibrium fueled the growth of an increasingly important parallel economy.Aside from some commercial agriculture, the parallel market for goods hasconcentrated on trading activities in the cities. An incipient service sectorbegan to develop during 1990-91.

1.18 This all too familiar picture is, however, transformed by the existenceof virtual OGL windows (imports with no QRs) in Angola despite the vastlyovervalued exchange rate. As explained below, the foreign exchange allocationsystem in Angola allows for varying degreei of flexibility in applying licensingrequirements and QRs to different socioeconomic actors and hence to differentcategories of goods. This practice constitutes an important deviation from thestandard policy depicted above and critically influences the functioning of theAngolan economy.

A. External Trade

1. Foreion Exchanae Allocation System

1.19 At about US$300 per capita, Angola's merchandise exports comparefavorably with those of other middle-income oil-exporting African countries likeNigeria (US$157) and Cameroon (US$146), and are the same as those of Argentina.Despite these relatively high export earnings, Angola was faced with anincreasingly tight foreign exchange constraint throughout the 1980s.

1.20 Under Angola's foreign exchange allocation system, virtual OGL windowscoexist with QRs of varying degrees, a contrast with the very restrictive QRsadopted in other countries such as Ghana (1972-83), Kenya (1973-80), and Tanzania(1967-83). The pattern of QRs in Angola, when effectively in place, has alsobeen fairly atypical. In most countries, QRs have taken the form of prohibitionsand ceilings on imports competing with local industry and on imports ofnonessentials. In Angola, QRs have generally had the opposite effect ofdiscouraging local production.

1.21 How can virtual OGL windows be sustained when the official exchange rateis only 1/100th of the parallel rate, however nontransparent and camouflaged theOGL windows? First, in practice, there is a variable limait to demand through theliberal import windows (OGLs, limited general licenses; see Table 1.2 fordefinitions and details), which is determined by some aggregate (and flexible)ceiling and by the small size of the eligible population (the urban upper classand some of the middle class). Second, the sustainability of the high-consumption import windows has been assured through the very large oil receipts.If, say, 150,000 Luanda urbanites have access to OGL consumption goods, whichwould use, say, US$300 million a year (only about 15 percent of totaloilrevenue), that would allow each of them US$2, 000 worth of goods a year. Thisis a very perverse case of "Dutch disease." This perverse and internallyinconsistent trade policy regime may have evolved from a more conventional Dutchdisease syndrome that was made worse by economic management held hostage to the

1/ At official prices.

TABLE 1.2 MLTRIX FOR ANALYSIS OF THE UNGXLANFOEMIGN EXCHANGE ALLCATION SYSTEM

Foreign effectiveexchange exchange Degree comments/

window ~Main market Main actor -rate Type of goods of QgR/ Isue

OGLi? oil * Company shops * Oil firma * Parallel * Oil machinery Small Official ex-company for consumer * Elite/formal * Official * Consumer change rate ap-

goods urban workers goods, includ- plies to con-*Direct use of ing luxury sumer goods,

inputs parallel rateapplies to in-puts purchasedfrom retainedexports

OGL army * Direct sloca- * Army * Official * Machinery Small The share oftion of capital * Soldiers * Consumer goods the army allo-and inputs cation for con-

* Army shops sumer goods isunknown

LWL" (a) * Duty-free shops * Priority para- * Official * Luxury con- Small LGL may be a* TAAG trips statals (SONAN- sumer goods virtual OGL if

GAL, ENDIAMA) overall ceil-ings are non-binding

LGL (b) * Lojae * Mid-level * Official * Nonbasic Moderate Cartao com-complementarlds civil servants consumer goods plementarlo,

LGL (b) some-what more re-strictive thanfor LGL (a)

MGLdU * Lojas * Urban formal * Official * Basic goods Large Cartao baslco,abasteclmlento workers quantitative

rationing

Aulp/ * Inputs, direct * Firms * industrial Very What is actualallocation to * Rural shops inputs large basis for al-industries * Others location of

inputs?

OF91 urban * Parallel markets * Informal sector * Parallel * Consumer goods Small Possible mainDuty-free shops * Urban poor sources of own

funds: unoffi-cial exports,repatriatedcapital

a. In this column, an attempt is made to suggest the degree of "restrictiveness" of quantitativerestrictions (OR) for particular purposes (or foreign exchange windows). "Very large" implies a highdegree of restrictiveness, while "small" implies that the system functions like a virtual OGL system.b. OGL, or open generalized licensing: Aggregate limaits are flexible and virtually nonbinding.Similarly, product- or beneficiary-specific limits on effective foreign exchange licensing arenonbinding or nonexistent.c. LGL, or limited generalized licensing: Aggregate limits may be binding while product-specificlimits do not effectively exist. For some, beneficiary-specific limits apply (those who have accessto cartaos complemnentarlaa, foreign exchange to travel with TAAG, and the like).d. GAL, or generalized administrative licensingt Aggregate limits are more binding than in LGL, andproduct-specific limits are effective (cartaos basicos).e. AL, or administrative licensing: Aggregate and product- or beneficiary-specific limits apply ineffect (largely the result of its residual nature).f. OF, or own-funds scheme: Imports financed out of foreign exchange purchased in the parallel marketor acquired through unofficial exports of capital repatriation.

war eff?rt, urban needs, and the relatively recent Portuguese coloniallegacy.

1.22 Anotier unusual feature of Angola's trade regime is the "own-funds"import windows. They do not appear to be the result of a conscious policydecision, as they were in Tanzania, but rather seem to have evolved as a creative

2J Incidentally, in the pre-Independence days, Portugal used to dump cheap liquor in Angola tosupport its own industry.

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response by economic agents to the immense distortions and loopholes in thekngolan economy. One such window operates through the Angolan airline TAAG,which charges US$15 round-trip (at the parallel exchange rate) to Portugal orBrazil, where passengers can buy large quantities of imports.3/ Anotheroperates through duty-tree shops, which allow customers to buy imported goodsupon presentation of foreign exchange alone, presumably purchased in theparallelmarket or acquired through illegal exports or capital repatriation. Theown-funds imports schemes are not institutionalized, and they operate through afew narrow channels. Given the distorted internal trade and pricing regimes andthe skewed purchasing power in Angola, the own-funds market also has a pronouncedproconsumption bias.

1.23 To understand the Angolan trade regime and associated policies, it ishelpful to identify the chief economic actors in Angola: (1) the foreign (oil)firm, (2) the military, (3) the urban elite (employees of priority parastatals,high-level technocrats), (4) the urban formal sector worker (civil servants,other firm workers), (5) the urban poor, (6) the farmer, and (7) the domesticfirm. Each window of foreign exchange allocation may be linked to particularactors and to other important characteristics such as the degree ofrestrictiveness of the QR regime for each window or the effective exchange rate.

1.24 Official Foreign Exchanae Allocation. The bulk of official foreignexchange comes from the oil receipts generated in the Angolan offshore fields byforeign enclaves. Prom the US$2.3 billion of oil exported every year, 4/ theforeign enclaves retain almost one-third to cover external payments, profitremittances, and consumer goods to stock the companies' shops. Therefore, forall practical purposes, these oil companies operate under an OGL system thatallows unlimited imports of any type of product, including consumer goods thatare sold at the official exchange rate.

1.25 In principle, the Banco Nacional of Angola (BNA), the Angolan centralbank, allocates the remaining oil receipts according to a foreign exchange budgetapproved by the Ministry of Planning (see Introductory Economic Review,UNDP/World Bank, June 1989). The degree of restrictiveness and accessibilityvaries according to the recipient or institution.

1.26 Imports for the army effectively fall into an OGL regime since aggregatelimits are flexible and virtually r.ouinding. Foreign exchange outlays by themilitary, including imports of consumer goods, are estimated at over US$500million (excluding those financed by official transfers), which represents overa quarter of total oil revenues. The share of consumer imports for the militaryis estimated at 20 percent (or US$100 million).

1.27 Certain priority companies, such as Sonangol (the oil parastatal),Endiama (diamonds parastatal), TAAG (Angolan airline), duty-free shops, and theHotel Presidente, also receive special treatment. Overall ceilings on this useof foreign exchange are set at the beginning of each year, but they are quiteflexible, and access to foreign excharge is more or less automatic. Since thesecompanies can bring in any goods they want, they are essentially subject tolimited generalized licensing (LGL). These imports are not recorded in thebalance of payments as merchandise i Sorts, so no estimate of the quantitiesimported in this way is possible. 5 /

3 According to recent requlations, Angclan nationals are entitled to US$500-1,000 travel allowancewithin a four-year period. The beneficiaries are about 600,000 employees, some of whom can use theallowance either to travel or to purchase goods inside Angola. Thus, they could bring in importstotaling US$75-150 million a year, at the official rate.

4/ Official exports of diamonds amount to over US$200 million; other exports (coffee, for example)are negligible.

5 This problem will be corrected when the new balance of payments methodology pr^posed by the IMFis adopted.

1.28 In practice, the amount of foreign exchange available for imports underdirect administrative allocation is a residual. In 1989, it was an estimatedUS$700 million, excluding capital goods imports.6 1 Even this narrowly definedlevel of civil imports is higher than total imports for many other Sub-Saharancountries in per capita terms (Table 1.3).

1.29 Within this framework of administrative allocation, there are alsodifferent degrees of flexibility according to the type of products or recipients.Priority is given to import licensing for consumer goods to meet urban demand,although the QR is stricter than that faced by the privileged institutionsdescribed above. In particular, imports of items to cover the generalquantitative basic entitlement for formal sector workers are subject to stricterQRs than those to cover the complementary entitlement (set in value) fortechnicians and mid-level civil servants. In fact, the allocation of foreignexchange for intermediate goods constitutes the real residual, actually subjectto an administrative license in the proper sense (see Table 1.2). With thepartial data available, a preliminary picture can be constructed of how thegovernment allocates foreign exchange among types of products and sectors (Table1.4).

2. Structure of Imports

1.30 Consumer Goods. Consumer goods as a share of noncapital merchandiseimports rose from 27 percent in 1985 to 45 percent in 1988-89. Of the US$287million allocated to imports of consumer goods in 1988, an estimated US$200million was for basic food imports. (The amount of basic food importscorresponds roughly to the value of the basic and complementary entitlements -cartaos - of formal sector workers mentioned above.)

1.31 In 1988, food imports accounted for around 15 percent of totalmerchandise imports of US$1,399 million. This share is too high for a countryendowed with large agricultural resources and in which agriculture accounts forabout 15 percent of GDP. In Zambia, by contrast, food imports account for only4 percent of total merchandise imports, while the share of agriculture in GDP isonly 11 percent. Furthermore, these food imports in Angola serve mainly theurban population, who account for about 30-40 percent of the population.

1.32 Intermediate Goods. The share of official foreign exchange allocated toimports of intermediate goods has been declining in relative terms, dropping from58 percent in 1985 to 40 percent in 1989. Intermediate goods for agricultureaccounted for barely 3 percent over the period 1985-89, and their share fell to2 percent in the 1990 foreign exchange budget (Table 1.4).

1.33 The share allocated to manufacturing inputs has also declined, fallingfrom 23 percent in 1985 to 18 percent in 1989. Foreign exchange seems to beallocated to this sector to prevent closures and labor layoffs rather than on thebasis of economic efficiency in different industries. Representatives of 18industrial firms interviewed in November 1989 claimed that capacity utilizationis constrained by their limited access to foreign exchange to purchase rawmaterials and that some factories have had to be temporarily shut down.7 /Furthermore, despite the decline in production over the last decade, the numberof workers has not fallen - and in some cases it has even increased. As a result,even with subsidized inputs, unitary production costs are expected to be higherthan those of imported goods (at the official exchange rate).

1.34 A disaggregated analysis would be required to establish whether the netvalue added of some activities would be negative if prices and inputs were valued

6/ Capital imports, estimated at US$252 million in 1988, are apparently financed mainly by foreigninvestment or long-term borrowing.

71 Capacity utilization ranged from 10 percent to just below 50 percent. See informal paper producedby an industrial sector reconnaissance Mission in December 1989.

TABLE 1.3 PER_ CAPSTA GPAND IORTS la SELECTED

(U.8S. dollars)

GDPCountry 1987 Lmprts/

Ghana 374 72

Kenya 315 85

Malawi 141 35

Mozambique 103 51

Tanzania 129 51

Zimbabwe 582 123

Angolab/ 700 78-/

a. Officially recorded merchandise imports in 1988.b. Preliminary estimate.C. Imports under direct allocation in 1989.

Source: World Development Report 1989, World Bank, 1989.

at border prices. In any case, it is clear that resource misallocation iswidespread. A striking example is that imports of raw materials for agricultureamounted to US$22 million in 1988 while imports of beverages (including beer andwhiskey) reached about US$25 million.8/ While the market is flooded withimported beer, some local breweries have closed because of a lack of raw materialimports. wheat flour factories have encountered a similar problem because of ashortage of imported wheat.

1.35 Imalications. The virtual OGL/LGL windows in Angola benefit from theextremely overvalued official exchange rate. Thus, the theoretical internalconsistency of the administrative regime is not being achieved in practice inAngola, and the ensuing distributional consequences and the misallocation ofresources are made even worse by the nature of these OGL facilities. Severalimplications follow:

* The system is biased toward consumer goods, especially luxury items(beer, spirits), through the operation of both the OGBJLGL windows andthe more restrictive administrative licensing system.

* There is a bias against intermediate goods for local production, whichis reflected in a disproportionately low overall allocation toagriculture compared with the sector's output potential. In addition,although the overall level of foreign exchange allocated tomanufacturing may be appropriate, it appears to be distributed thinlyacross firms in order to enable them to survive at low capacity, withoutreference to potential competitiveness.

/ This figure underestimates beverage imports because it is based on the partial records of theSociete Generale de Surveillanoe (SGS), which exclude imports for the army.

9/ This is in sharp contrast to the more conventional and internally consistent restrictive traderegimes, where the OR and administrative allocation systems usually ensure that the importation ofnonbasic consumer goods is minimized.

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TAWS6 1.4 fg ;QII-MG A T12

(Mollions Of U.S. dolars)

1990Imprt 1985 1986 1987 1988 19098/ Budget

Consumer goods 157.7 74.7 134.4 287.0 236.1 287.1

Intermediate goods 333.7 138.1 155.7 269.4 211.1 356.8

Agriculture 15.9 9.9 13.4 21.7 16.9 18.0

Manufacturing 134.6 37.0 60.7 121.4 96.1 167.0

Petroleum 77.9 57.5 39.5 59.3 27.0 60.0

Snergy 7.6 2.1 5.0 7.6 5.1 8.0

Transportation and 41.9 15.9 14.8 21.5 30.0 25.0communication

Social consumptionb/ 87.5 24.8 45.1 78.9 74.1 126.1

Total 579.0 237.6 335.1 635.3 521.5 770.0

a. To September.b. Includes medical and educational supplies.

Source: Banco Nacional de Angola (SNA).

- There is also a bias against domestic production of many products, asillustrated by the beer and wheat flour industries. Unlike theexperience in other countries, import restrictions do not appear to bedirected at protecting local production, whether for import substitutionor for export. Although the official overvaluation of the currencyunderlies the basic disequilibrium in the foreign exchange market, theforeign exchange allocation system has contributed to thisdisequilibrium through its adverse impact on domestic production.

* Although the size of the foreign exchange allocation to the army is notan economic issue, by and large, it may well be that the prevailingtrade and price regimes encourage the purchase of expensive equipmentand nonessential consumer goods, while imports of intermediate goodssuffer. I°

* Overinvoicing of imports and underinvoicing of exports are prevalent asa result of / the overvalued exchange rate and need to beinvestigated. 1

1.36 Together, exchange controls and the distortions generated by the largeovervaluation of the exchange rate have led to the development of an activeparallel market for foreign exchange.

1°' This suggests that the same (or higher) level defense "output" might be attained with a smalleramount of foreign exchange if the exchange rate was not overvalued.

II/ In this regard, it is particularly important to study the operations of foreign companies interm of transfer pricing and also their links with the urban elite's consumption basket.

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3. The Parallel Market for Foreign Exchanae

1.37 The parallel market for foreign exchange is still illegal in Angolaeven though duty-free shops accept dollars obtained through unofficial channels.while the law is not strictly enforced, a certain degree of risk is associatedwith parallel market transactions, which inhibits open transactions.12/

1.38 In Angola, the government exercises tight control over the main sourcesof export earnings (oil and diamonds). So unlike the case in countries such asGhana, where the supply of foreign exchange in the parallel market came largelyfrom illegal exports of the country's two chief exports (coffee and cocoa), themajor source of parallel market foreign exchange in Angola appears to beinvisible transactions by diplomats and by expatriates working for foreignenclaves. There is also some smuggling of diamonds (estimated at about US$50million a year), wood, and ivory. Another important source may be repatriatedcapital flight, particularly capital that left the country through overinvoicingof trade documents.1 3 /

1.39 The demand for foreign exchange in the parallel market also reflectscommercial transactions and capital movements. The demand for "illegal" importsis estimated at over US$100 million a year, including imports smuggled in by TAAGpassengers and imports from duty-free shops (lojas francas) financed with illegaldollars. In addition, the demand for capital flight and currency substitutioncould be significant given the degree of overvaluation of the kwanza and thenarrow range of assets for keeping real wealth, an element that makes theparallel market potentially volatile.

1.40 The parallel market rate in Luanda climbed from Kz 600 to the U.S. dollarin October 1984 to Kz 2,800 in November 1989 (Table 1.5) while the official rateremained fixed at Kz 29.92. After a 100 percent rise in the parallel exchangerate in 1985, the rate of increase declined gradually, dropping to 11 percent in1988. However, in 1989 it accelerated to an annual rate of 40 percent. Althoughthese movements may be partly driven by the expansion in money supply (20 percenta year), the recent acceleration appears to be associated with speculative demandarising from expectations of an imminent devaluation, announced by the governmentin early 1989 but not yet implemented.14 /

1.41 The parallel market rate approximates the equilibrium exchange rate (ofboth the current and capital accounts) that would prevail in the absence ofgovernment intervention, although it may be slightly above tt 't equilibriumbecause of risk and transaction costs. Empirical evidence for other developingcountries suggests that the equilibrium exchange rate for external transactions,excluding capital movements, is usually lower than the parallel market rate.15 7

B. Internal Trade

1.42 This section looks at the internal trade regime and the linkage betweenprice controls and consumption rationing and the foreign exchange allocation

12/ This explains the reluctance of some traders at the Roque Santeiro market to accept payment indollars for fear of being caught.

13/ Overinvoicing could represent between 5 percent and 10 percent of total imports. It is estimatedthat about US$l billion have left the country through overinvoicing during the 1980s. According toSociete General de Surveillance (SGS), savings from inspected merchandise were equivalent to US$9.7million, or 5 percent, in the first half of 1989. Typically, SGS inspects one half of imports; thusif the minimum ratio is applied, overinvoicinq could amount to US$70 million a year.

14/ The government introduced a monetary reform and devalued the new kwanza by 100 percent sincethen.

15/ It is extremely difficult to estimate the real exchange rate for current account transactionsin Angola. To the extent that a certain proportion of final consumption takes place at officialprices, the definition of an appropriate index for domestic inflation becomes very complicated - evenmore so with the poor data availability.

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TABLE 1.5 ANGOLA: PARANLL B M = ErCHANG RATEIN LUAND. 1984-89

Date Kz/US$ 12-month increase (M)

October 1984 600

November 1985 1,200 100.0

November 1986 1,500a/ 25.0

Novenber 1987 1,800 20.0

November 1988 2,000 11.0

November 1989 2,800 40.0

a. Average of the rates of the two sources.

Source: Introductory Economic Review, UNDP/World Bank, 1989; and Africa Analysis.

system. Administrative controls on domestic prices, distribution, andconsumption can be regarded as the mirror image of the external trade policy,namely, currency overvaluation and foreign exchange allocation.

1. Price Controls

1.43 In principle, price controls apply to all goods and services, exceptfruits and vegetables, whose prices have recently been liberalized. The priceof a basket of basic goods plus some public utilities is fixed at a uniform rateacross the country. The prices of other products under regulation are set on thebasis of declared prices (which include taxes, subsidies, and profit margins) andcommercial margins. Un r the prevailing price regime, the rules for settingcommercial and profit margins are not clearly known.16/

1.44 Aaricultural Prices. In mid-1988, the prices of 52 fruits andvegetables were liberalized, but other agricultural products, including cereals,remain under price controls. Official prices for regulated agricultural productshave remained the same for mary years and are uniform for all regions.Differentials in productivity and costs are not taken into account.

1.45 Commercial agriculture has virtually disappeared in Angola because ofprotracted price controls and the limited availability of the farmer'7sconsumption basket and agricultural inputs, including seeds and fertilizers. 7'Price controls at the producer level have been enforced by the government'smonopoly on the importation and wholesale distribution of intermediate and finalgoods in rural areas. Farmers would rather engage in barter trade or parallelmarket activities than sell at the official prices. Attempts to enforce officialprices have been ineffective and have served only to reduce marketed output.le/

16J In May 1989, the government approved changes in the price regime that envisaged a revision ofthe list of goods and services subject to fixed prices, the introduction of guaranteed prices foragriculture, an update of commercial margins, and an across-the-board increase in fixed prices. Noneof these measures has yet been implemented.

17W The war has disrupted commercial links in certain areas, but it does not explain the stagnationseen in safer zones.

19/ There seems to be no clear rationale behind many controls. For example, it is surprising thatthe government continues to control the price of cassava, which is basically a subsistence productfor farmers and is not very popular in the urban consumption basket.

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1.46 The partial liberalization of prices for some products has not beenaccompanied by a liberalization of agricultural inputs, and their supply is stillin the hands of the state. Thus, the partial liberalization alone can beexpected to improve resource allocation very little. In addition, farmers seemto be confused and even mistrustful about the legality and duration of the recentprice liberalization.

1.47 Industrial Prices. Because of the predominance of public enterprisesin industrial activities, official prices are somewhat easier to enforce in thissector than in agriculture. Nevertheless, a significant proportion of industrialproducts is diverted to the parallel markets through various mechanisms (seechapter III on wage remonetization). Official price policy is decided on an adhoc basis and seems rather anarchic. The prices of some domestically producedgoods are now allowed to vary according to production costs (at official prices),including a profit margin that can fluctuate between 5 and 30 percent with noapparent justification for the differences.

1.48 Retail Prices. Assessing the role of official prices in finalconsumption requires an understanding of the operation of official retail tradeand official shops. Most of the analysis presented below focuses on theoperation of urban retail trade in Luanda, the capital city.

1.49 The term "official market" refers both to different kinds of shops andto price regimes. Official shops for urban consumers comprise at least threecategories, accessible to different socioeconomic groups: (1) shops open to allformal sector workers (lojas de abastecimiento), who receive a generalquantitative basic entitlement (cartao) for 17 basic items in exchange forkwanzas;191 (2) shops open to mid- and high-level technicians and civilservants (lojas complementarias), who receive both the basic entitlement and acomplementary entitlement defined as a certain value of goods rather than a fixedbasket, in exchange for kwanzas; and (3) duty-free shops (lojas trancas), whichare open to holders of special entitlements (high-level bureaucrats, managers ofparastatals) in exchange for kwanzas or dollars.

1.50 Imported products constitute almost 90 percent of the sales of thesethree types of shops. Very few domestically produced goods are sold in theofficial shops (lojas de abasteclmiento and complementarlas) because domesticproduction is so low and because what little is produced is diverted to theparallel market.

1.51 The size of the official market for consumer goods can be estimated byvalue and by the number of beneficiaries. The government issues 700,000 basicentitlements a month, each worth about US$30 at parallel market prices for atotal of more than US$220 million in imports a year.20 1 In Luanda alone, theentitlements granted to 300,000 Angolans amount to about US$100 million. Thisimplies that per capita imports of consumer goods in Luanda are almost doublethose of other cities. Admittedly, supplies are not always available at thebasic shops; at least 30 percent of supplies are believed to be diverted to theparallel market. The government also issues complementary and specialentitlements to about 50,000 mid- and high-level civil servants. These range invalue from about US$50 to US$130 a month (Kz 1,500-20,000), for a total of aboutUS$60 million in imports a year.21' The availability of these goods is much

19/ The basic entitlement includes fixed amounts of sugar, beans, rice, pasta, edible oil, vinegar,soap, wheat flour, maize flour, powdered milk, margarine, salt, matches, meat, and fish.

20/ Assuming that 90 percent of these basic entitlements are imported items, equivalent importa areabout US$27 per entitlement.

211 Figures are consistent with those of the Banco Naclonal de Angola (SNA) on consumer importsfinanced by official foreign exchange. The ceilings for these imports were US$27 million in 1988 andUS$40 million in 1989, excluding ceilings for the army.

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better than the basic entitlement goods. And, unlike the basic entitlement,these entitlements can be rolled over if they are not used in a particular month.

1.52 The different types of entitlements are directly linked to the foreignexchange allocation system, which allows for different degrees of importrestrictions. The quantity-based goods of the basic entitlement correspond toimports subject to stricter QRs (basic foodstuffs) while the complementary andspecial entitlements, set by value, correspond to more liberal import windows.In addition, a certain proportion (in some cases, all) of the duty-free shops'imports are financed with dollars circulating outside official channels. It isnot known how many imports are brought into the country through this channel, butthe evidence suggests that the number of duty-free shops is rising.22/ Thisissue needs to be studied further.

1.53 Official prices are enforced only in official shops. However, the pricesare not uniform across all official retail establishments. For example, theofficial price of one liter of edible oil is supposed to be Kz 86.7 (US$2.93),but its price in a loja complementaria is Kz 60 (US$2). Similarly, the officialprice of powdered milk is Kz 138.8 (US$4.64) per kilo, but its price in a lojacomplementaria is Kz 49 (US$1.64).

1.54 Official prices appear to be applicable only to the lojas deabastecimiento, where availability is limited and quantitative rationingprevails. The published official retail prices for the majority of products wereraised slightly between 1985 and 1989, but the changes do not appear to reflectincreased international prices (Table 1.6). For the four products shown in Table1.6, the dolldr price equivalent of official prices was three to six times higherthan comparable wholesale world prices in 1989. The differential cannot beexplained by the margin between wholesale and retail prices. Rather, it suggeststhat the government, through official shops, is charging an implicit tax byincreasing the price in kwanzas for imported goods while the official exchangerate is still frozen. On the other hand, the higher official prices may reflecthigher unit costs (at official prices) of domestically produced goods. It couldbe said, since these are estimates at official exchange rates, that thegovernment - or the shops - are capturing part of the rents that would otherwisego to retail traders.

1.55 Since the basic entitlement provides the consumer with a quantity ofgoods, official prices for these goods have no role in determining consumption.Assuming that supplies are available, the 700,000 or so cartaos holders willprobably exchange some of these products in the parallel markets, depending onparticular needs. For some other goods, however, that are not traded in parallelmarkets, official prices do affect final consumption. These include gasoline,kerosene, and public utilities such as electricity, water, and telephones.

1.56 Finally, the prices of imported goods sold in the lojas complementariasand the duty-free shops, which are comparable to tax-free international prices(at the official exchange rate), are effectively outside the official priceregime although the accounting unit is the official exchange rate.

2. The Parallel Market for Goods

1.57 The parallel market is not a new development in Angola, although the sizeand importance of the market have grown over the years. In the early 1980s, thismarket was relatively thin, mainly because black market activities were illegaland harshly punished. Since 1987, however, parallel market activities for goodsbegan to be tolerated, and they are now legitimate in fact if not in law.

1.58 The boundaries between legality and illegality, however, have not beenclearly defined by the government. For instance, a whole range of small

22J A new duty-free shop, Intermark, opened in November 1989. According to central bank officials,total sales in this shop on opening day amounted to US$20,000 (US$7 million a year).

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TABLE 1.6 ANGOLA: OFFICIAL RETAIL PRICES ANDWORLD PRICES FOR SELECTED G DS. 1980, 1985. AND 1989

(Usw kg)

Ratio of official toOfficial prices World prices world prices

Goods 1980 1985 1989 1980 1985 1989 1980 1985 1989

Rice 0.71 1.18 1.22 0.43 0.22 0.25 1.65 5.36 4.88

Sugar 1.37 1.52 1.57 0.73 0.48 0.54 1.88 3.17 2.91

Edible oil 1.42 2.19 2.93 0.63 0.60 0.51 2.25 3.65 5.75

Margarine 3.38 3.92 5.25 1.50 1.77 1.48 2.25 2.21 3.55

Source: Angola, Ministry of Planning; United States Bureau of Labor Statistics.

businesses (tailors, hairdressers) appears to be subject to price policing by theauthorities, desPite the fact that their inputs, for example, come from theparallel market. 3/ This ambiguity about where the official market endsadversely affects the behavior of economic agents.

1.59 The parallel market is usually associated with visible open marketsoperating in the cities, but its domain involves all trading activities outsidethe official price regime. Although data coverage of the parallel market isvery poor, it has been observed that these visible markets have expandedsignificantly over the past few years, particularly in Luanda.

1.60 SuPPlV of Consumer Goods. The supply of consumer goods to the parallelmarket appears to be highly specialized in terms of the sources and types ofproducts. Aside from fruits and vegetables, which are sold freely in this marketfollowing the price liberalization, the major source of basic foodstuffs andbeverages to the parallel market has been the increasingly large-scale diversion(theft) of officially imported goods from ports and warehouses.24 / Thesediversions are estimated at one-third of official consumer imports, or someUS$100 million. Consumer durables such as shoes, clothing, and electricalappliances are typically smuggled into the country by Angolans traveling on TAAGto Portugal and Brazil. Smuggled imports from this source are estimated at US$50to US$100 million a year.2?7

1.61 Another source of goods in the parallel market is the sale of goods tothe market by people with access to official shops, as well as the resale (ortheft) of payments in kind received by industrial workers. Holders of cartaossupplement their income by reselling goods at the parallel market price. Beeris the preferred traded item and is used like currency. According to the managerof an official shop, beer accounted for 90 percent of total sales. One can of

23/ For example, tailors who purchase their fabrics in the parallel market do not feel free to settheir own prices for their products. Similarly, the advertised price for a haircut at a localhairdresser is supposed to be Kz 1,500 - equivalent to one can of beer at parallel market prices.

24/ only private importers have put claims on insurance companies for the lost merchandise, but thebulk of diversions remains unclaimed. This tends to reinforce the claim that government officialsmight be involved in the diversions. The official version is that insurance premiums will rise ifclaims were made in all cases of loss. For this to make economic sense, insurance premiums wouldhave to be higher than the value of the lost merchandise, which is absurd.

25s This is a very rudimentary estimate. An average of 73,000 TAAG passengers fly to Lisbon and Riode Janeiro each year. If 70 percent of them bring in US$1,000-2,000 of merchandise, these importswould total roughly US$50-100 million. This estimate does not include endorsements of tickets fromTAAG to other airlines.

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beer bought at the shop for Kz 15 is sold at Kz 1,500 in the parallel market -about the same differential as that between the official and the parallel marketexchange rate. The kwanzas exchanged for beer are then used to purchase othergoods not available in the official shops, such as fruits and vegetables.

1.62 Prices of Goods. The parallel market prices of certain products inLuanda experienced a significant decline between 1985 and 1989, and othersincreased (Table 1.7). The first group includes basic foodstuffs (such as rice,sugar, pasta, edible oils); the second, consumer durables (shoes, shirts). Thesediverging movements in the parallel prices have been accompanied by a continuousrise in the nominal black market exchange rate and an upward adjustment ofofficial prices for most products.

1.63 A simple analytical framework may be used to explain the determinationof parallel prices in Angola. Imported goods may be divided into two maingroups: those subject to strict import rationing and those acquired through moreliberal foreign exchange windows, including smuggling.

1.64 Imports of basic foodstuffs in Angola are subject to stricter QRs thanother consumer goods. Thus, analytically, they can be regarded as nontradableswhose price is determined by demand and an inelastic supply curve, which shiftsevery year according to the aggregate availability of foreign exchange andchanges in the composition of QRs. The higher transport cost associated withbulkier loads also reinforces their nontradables status. Consequently, changesin the parallel prices of these products would not be expected to be closelyrelated to movements in the black market exchange rate. Therefore, the observeddecline in the prices of basic foodstuffs in 1989 may well reflect an increasein the supply of imported focodstuffs in 1989 accompanying an increased level offoreign exchange.26

1.65 Imports that take place through virtual OGL windows become tradables,and their prices are expected to follow movements in the black market exchangerate and in international prices. In this case, supply will be completelyelastic at a price level equivalent to the international price multiplied by theblack market exchange rate plus other risk and transaction costs. Similarly,products resold in the parallel market from duty-free shops (like beer, whiskey,cigarettes) also fall in this category because, in practical terms, they facecompetition from the other own-funds imports and could be reexported.

1.66 In addition, it can be demonstrated that changes in official prices donot, in themselves, affect parallel prices. Therefore, other things remainingunchanged, individual official prices can be changed or even removed withoutaffecting parallel prices. This conclusion applies only to individual products,however; it will not be applicable when overall changes in price policies takeplace. (Annex I.A provides a detailed graphic illustration of the determinationof parallel prices and their relationship with official prices.)

C. Other Trade Policies

1.67 To complete the picture of the existing trade regime in Angola, thissection briefly describes the role of import tariffs, export restrictions, andtaxes.

1. Import Tariffs and Sales Tax

1.68 On paper, Angola's import duties range from zero to over 100 percent forcertain luxury products. There are also some specific tariffs for a few items,like automobiles. In practice, the customs system is ineffective because ofnumerous exemptions, customs evasion, and delays in collection. As a result, thegovernment collected import duties equivalent to less than 10 percent of the

261 Official imports of consumer goods rose from US$74.68 million in 1985 to nearly US$300 millionin 1989, while total imports were about US$1.4 billion in both years.

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TABLE 1.7 ANGLA: PALLEL MARKT PRIC8 toRSELECTED_PRODUCTS0 _LUANDA 195 AND 199

Domestic Ratio ofDomestic price price in World price domestic toin kwanzas US$& in USS world prices

Product 1985 1989 1985 1989 1985 1989 1985 1989

Nontradablesb/

Rice (1 kg) 1,000 200 0.67 0.07 0.22 0.25 3.05 0.28

Sugar (1 kg) 2,500 800 1.60 0.29 0.48 0.54 3.48 0.54

Edible oil tl kg) 100 500 0.67 0.18 0.60 0.51 0.90 0.35

Pasta (1 kg) 200 1,000 1.33 0.36 0.75 0.75 1.77 0.47

Tradables

Cigars (1) 500 1,000 0.33 0.36 0.30 0.30 1.10 1.20

Beer (1) 1,500 1,500 1.00 1.54 0.60 0.60 1.67 0.90

Soft drinks (1) 1,000 1,000 0.80 0.36 0.45 0.45 1.78 0.80

Men's shoes (1 pair) 45,000 60,000 30.00 21.43 25.00 25.00 1.20 1.17

a. Parallel market prices divided by the parallel exchange rate at the end of each year(1985:1500; 1989:2800).b. Analytically nontradables because subject to strict QRs, with price determined bydemand and an inelastic supply curve that shifts each year according to availability offoreign exchange.

Source: Angola, Ministry of Planning, Policia de Precios; United States Bureau of LaborStatistics.

value of total imports in 1988 (at the official exchange rate), much the samelevel as in 1985.27/ The level of customs collection is even moreinsignificant from a financial perspective since the price level is largelydetermined in the parallel market but collection proceeds according to officialprices. In addition, consumption taxes are levied on tobacco, cigarettes, beer,and petroleum derivatives, also at the official prices. Collection of thesetaxes on imported items has also been ineffective.

2. ExDort Restrictions

1.69 In principle, there are no restrictions on the type of products that maybe exported, but in practice the authorities do not allow exports of productsthat are considered necessary to meet local demand. The required documentationfor exports includes a registration card and a certificate of quality and origin.

1.70 Given the overvalued exchange rate, exports of nontraditional productsthrough official channels have been negligible and sporadic, normally the resultof a sale on behalf of a public enterprise. The parastatal, EXPORTANG, is incharge of centralizing marketing and supporting exporters, but understandably its

27/ Taking total (recorded) imports of US$1,399 million in 1988 and customs duties of Ka 3,600million (US$120 million at the official exchange rate but only US$1.2 million at the parallel rate).The figure for merchandise imports excludes imports by duty-free shops financed with own-funds.

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role has been minimal.281 Angola has no specific plan for promoting exports,but some government officials have been discussing the possibility of introducingcredit facilities and a foreign exchange retention scheme for exporters.

111. ZMPLITIONS OF THE CMURENT TMDE RZGZMI

A. Costs Associated with Market Distortions

1.71 The costs associated with the trade and domestic price regimes can besummarized under three categories.

1.72 Distributional Effects. The distributional impact of the segmented market(official and parallel) in Angola appears to be highly regressive. The ultimatebeneficiaries of the rent realized through the existence of this dual market areformal sector workers who constitute a fraction of the urban population and areconcentrated mostly in Luanda. For these workers, yearly per capita importsrange from USS300 for a mid-level civil servant to US$60 (or even less, dependingon the availability of goods) for the lowest category of formal sector worker.The urban poor in the informal sector (the unemployed, small business people)receive no benefits, while the rural population, which constitutes 70 percent ofthe population, has been effectively left outside the system.

1.73 Microeconomic Effects. At the micro-level, the system entails severaltypes of efficiency cost. First, rent-seeking activities encourage corruptionand result in the diversion of resources from productive activities. Second, theprice structure in the parallel market does not reflect relative internationalprices. Although the parallel market serves as a safety valve to reduceinefficiencies generated by the administrative allocation system, its pricestructure is still distorted relative to a market that is free of administrativeintervention. In fact, the volatility of relative prices in the free market hasan adverse impact on potentially productive activities. And the continuing stateof war in Angola disrupts the commercial network, exacerbating existingdistortions.

1.74 Macroeconomic Effects. The trade regime in Angola, supported by thelarge oil revenues generated by the foreign enclaves, has effectively fed animport promotion strategy (mainly for consumer goods). The result has been apersistent decline and, in some cases, a virtual disappearance, in nonoilproductive activities for both importables and exportables.

1.75 The country's heavy reliance on imports is associated with the existenceof liberal foreign exchange windows, despite the grossly overvalued exchangerate. Although the parallel market has helped to correct the currencyovervaluation, the ability of local producers to grow and compete has beenhandicapped by the enforcement of price controls and other types of governmentintervention at the production and distribution levels.

B. Sectoral ;Macta of the Trade Reaime

1.76 Aoriculture. Subsistence farming constitutes most of the activity inthe rural sector. Rural transactions rely heavily on barter trade. While thebreakdown of commercial links with the cities has resulted partly from the war,the lack of economic incentives for commercial agriculture and the shortage ofinputs have been crucial factors. Local farmers have also suffered from a severeshortage of basic goods. Official producer prices have been enforced through thestate monopoly on wholesale distribution. Trade between rural and urban areashas been weak, and parallel markets have developed for retail trade.

1.77 Some positive changes have followed the liberalization of prices forfruits and vegetables in mid-1988. Over the last two years, the marketable

28/ In 1988, nontraditional exports amounted to Kz 21 million (US$700,000). Last year, however,nothing was exported besides some scrap iron (chatarra).

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output of these products has increased somewhat, at least in the Luanda area.This marketable output is sold entirely in the parallel market and prices are setfreely. Farmers' responsiveness to price liberalization provides an insight onthe potential effects of a widespread price liberalization in the sector.

1.78 However, access to agricultural inputs such as seeds and fertilizers isstill centrally controlled, and subsidized prices for these products have led toa great deal of waste. For example, according to official sources, theconsumption of tomato seeds relative to output is much higher in Angola than inItaly.

1.79 Industry. As a result of a continuous decline in production since 1980,the manufacturing sector accounts for only 6 percent of GDP. The inefficientrationing of foreign exchange for intermediate inputs across firms with differenteconomic potential has resulted in gross underutilization of capacity.

1.80 The concept of industrial protection is to some extent inapplicable inAngola, given the absence of competition in the official industrial market andadministrative regulation of prices. Furthermore, the operation of liberalimport windows that channel tax-free imports of final goods into the paralleleconomy while stricter QRs apply for intermediates suggests that effectiveprotection may be negative for several industries (more study is needed on thisissue).

1.81 Services. Most of the services sector is in the hands of the state(transport, commerce); consumer services such as restaurants are virtuallynonexistent.

rv. THE POLICY ZNPLICATIONS AND SUMGQST3D OPTIONS FOR RWORN

1.82 Four major objectives ought to guide policy changes: market integration,economic restructuring of the nonoil sector, protection of vulnerable groups, andmacroeconomic stability. This section discusses the policy issues in three majorareas, always recognizing that external and internal trade policies areintrinsically linked.

A. Zxchanas Rate Unification

1.83 The exchange rate is the most important, policy variable for integratingproduct markets. It is evident that the price of imports and exports ought toapproximate their scarcity value. Thus, there is no escape from a major exchangerate realignment. The final objective of exchange reform, whether immediate orgradual, is unification of the market. Movement toward a unified exchange rateconstitutes a key condition for improving efficiency and eliminating wasteful useof resources.29/

1.84 Adjustment of the official exchange rate to a market-clearing level mayoccur either through an administrative mechanism (managed exchange rate) or aforeign exchange auction. A managed exchange rate would be subject to periodicquasi-automatic adjustments that depend on balance of payments developments,terms of trade, parallel market rates, reserves, and related factors. A foreignexchange auction generally serves as a temporary mechanism during the transitionfrom an extremely overvalued rate to a more realistic one; later, a flexiblymanaged exchange rate (or managed float) can be introduced.

1.85 The most important benefit associated with adopting an appropriateexchange rate is that it permits the immediate removal of QRs on imports, therebyimproving resource allocation and providing incentives for productive activities.Importers would be allowed to import anything as long as they have the localcurrency to buy the foreign exchange.

29/ A dual system already exists with the operation of official and parallel market rates forforeign exchange.

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1.86 The major drawback to an immediate exchange rate adjustment is that itwould require a simultaneous increase in prices and remonetization of wages ofsuch magnitude as to make the process unmanageable. And considering the extentof the distortions in the Angolan economy, there is a great danger ofovershooting these price or wage adjustments and generating economic instability.For example, if prices were not allowed to adjust to free market levels, thegovernment would face an unsustainable rise in subsidies and therefore in thebudget deficit. In addition, the adjustment of the official exchange rate willhave distributional effects that would have to be weighed beforehand.

1.87 There are alternative options to a quick, immediate adjustment. Theseoptions have been introduced by African countries at different stages of theiradjustment programs, in various circumstances and with different results. Theirsuitability to Angola, however, is not assessed in this report. There arebasically four alternative options: (1) the introduction of a market-clearingforeign exchange window, financed totally or partially with official funds, withonly a few selected goods remaining temporarily outside the window; (2) thesanctioning and broadening of the own-funds import scheme, which would allowautomatic licensing for imports to anyone with foreign exchange (no questionsasked); (3) the introduction of a 100 percent foreign exchange retention schemefor exporters to promote nontraditional exports, with retention rights eitherfully or partially transferable; and (4) the outright legalization of theparallel market exchange rate, with foreign exchange agencies and banks providingthe market.

1.88 All these options imply that the administrative allocation of foreignexchange would continue during the transition to a unified market-clearing rate.Even during this transition period it is imperative to improve the compositionof administrative allocations in favor of development imports, such asagricultural inputs and transport equipment. Should a partial liberalizationtake place, some nonessential products such as beer, spirits, or cars could beimported using the "window" or nonadministrative allocation mechanism selected.

S. Intearation of the Internal Market

1.89 Formalization of internal liberalization measures is a necessary steptoward market integration. The authorities should clearly announce that parallelmarkets are fully sanctioned by the government. All activities that are notstrictly part of the official sector, such as the parastatals, should be free ofprice policing and should be allowed to operate without restrictions. Thismeasure could and should be implemented without delay.

1.90 Introducing this measure would involve widening the scope of priceliberalization to all agricultural products and allowing farmers to receivewhatever price they can negotiate. Also, prices should be liberalized in theservices sector in order to promote private sector activities, including thoseof small entrepreneurs. The liberalization of industrial prices may need to besynchronized with the wage-monetization program for parastatals. Private firmsshould be allowed to operate freely.

1.91 Given that official prices are effectively enforced only in officialshops, price liberalization need not be inflationary. After the firstadjustment, provided that appropriate fiscal and monetary management is in place,the price level may even fall if there is a positive supply response.

1.92 In addition, it is crucial to introduce competition in the distributionnetwork to allow participation of private traders at all levels of the marketingnetwork and to break the monopolistic grip of state parastatals and a fewprivileged private companies. Traders should be encouraged to transport goodsto and from rural areas and to buy and sell freely. It is particularly importantto break up the government's monopoly on the wholesale market for intermediategoods as part of a comprehensive package to encourage commercial agriculture.

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1.93 In practical terms, the government has a unique opportunity to definefrom the ground up a meaningful industrial policy (including a tariff regime) inanticipation of the adoption of a reasonable exchange rate. Aside from theeventual removal of quantitative restrictions, this would entail the adoption ofa simple and transi-arent tariff structure, preferably with a minimum uniform ratesufficient to finance customs operations. A uniform tariff would ensureneutrality with respect to different types of goods and facilitate implementationand duty collection, which at present are almost totally ineffective.

1.94 A duty drawback scheme for exporters may need to be considered once thetariff reform is in place. Even with an appropriate exchange rate, the existenceof import tariffs could mean negative protection for exports unless a drawbackscheme is adopted. The implementation of this measure is rather complicated andmay require further analysis.

1.95 In addition, consistent with both fiscal revenue and social consumptionobjectives, the government could consider the introduction of a unified sales taxon all final goods, whether i.mported or domestically produced. A few excisetaxes could also be imposed at rather steep rates for luxury goods (alcoholicbeverages, cosmetics, tobacco, cars).

C. CoGMlemntarv Measures

1.96 The creation of an effective and decentralized financial sector in thenear future will be crucial to support the expansion of the free market economy.In this regard, we think that foreign banks should be encouraged to operate inAngola to support private sector activities.

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AUx 1

DZ?NRUUNING PRICSS IS TiE PARALLEL MARKET

1.97 This annex illustrates the determination of parallel prices under partialequilibrium conditions. For this presentation we define as "nontradables"products that are subject to strict QRs, and as "tradables," products that faceliberal foreign exchange windows, whether through own-funds mechanisms orsmuggling. In particular, we explore graphically (1) whether the parallel marketprice of a good represents the equilibrium price that would have prevailed in theabsence of official prices, (2) whether the official price of a good affects itsparallel price, (3) whether the parallel price of a good is related to theparallel exchange rate, and (4) what impact unification of the official andparallel markets might have on the market-clearing price.

A. General Conclusions

1.98 Four conclusions can be derived from the graphical analysis presentedbelow. First, the parallel market price of both "tradable" and "nontradable"goods equals the equilibrium price that would have prevailed in the absence ofofficial prices. Second, changes in the official price will not alter theparallel market price. Third, the black market exchange rate influences theparallel price only of "tradable" goods. Finally, it follows that other thingsremaining unchanged, unification of the official and parallel markets for anindividual good will not alter its market-clearing price.

S. "Nontradable" ImPorted Fixed-Supply Goods

1.99 Under import rationing, the market price is determined endogenously.Supply may be represented by a vertical curve that shifts according to changesin import quotas. Thus, the equilibrium price will be driven by demand at anyparticular point. To simplify the analysis, assume that all domestic supply isimported and subject to import quotas, that the marginal substitution ratesbetween goods are exactly the same, and that transaction costs are either smallor the same for all consumers.

1.100 The eneral cas is igure &.1 Genral Case: Market EquiUlbrium under Impartrepresented first in Figure Ratiei5§A.1. Total demand (TD) fora particular product Q can P mbe divided into that of Parallel rket Official marketconsumers holding buyingrights (say, 2/3 of the TStotal), represented by linePR, and that of consumerswithout buying rights,represented by PNR (thedifference between totaldemand TD and PH). This isdepicted on the right side PE \2of the Figure A.1, where -_ Ethe official market isrepresented by PH and TS.

1.101 At any price above P iP1, consumers with buying / rights will resell aquantity of their productin the parallel market PNH 0 pHequal to the differencebetween total supply TS andtheir demand PH. Thisdifference will zesult in the supply of goods in the parallel market represented

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by P1P on the left side of the diagram. This line represents the opportunitycost of consumption of Q by those with access to official rationing. If wetransfer the parallel market demand PNI into the left side of the diagram, wehave the parallel market of Q, whose equilibrium price is P2, the same price thatwould have prevailed in the absence of official prices. If the official pricewas set below Pl, there would be an excess demand that could not be satisfied asconsumers are faced with an inelastic supply. Even if the official price werezero, that is, if Q were given as a grant, the same principle would apply sinceconsumers would still supply their excess supply according to their opportunitycost PlP. This implies that changes in the official price, ceteris paribus, willnot affect the parallel market price.

1.102 The existence of FIgu A.2 Market Zquilibnium with Divegalon from Official to

diversions (theft) from the a xIrofficial to the parallelmarket does not change this Parallel market Offtcial market

basic result, illustratedin Figure A.2. The supplyof Q in the parallel market . Tis now determined by the TSl

resales of the product plusthe diversions. The / \quantity supplied for /resale is now given by the \difference between PH' andTS', which when transferredinto the parallel market E 2 \ d_\ ! _ Ediagram becomes PiP.Adding the diversions, weobtain P0, the new supply /Pof Q in the parallelmarket. Meanwhile, the / I1\

demand for Q in the /official market will shift e-to the parallel market and ea PM P

the equilibrium price E2will be the same as El andE.

C. Tradables

1.103 The premium between the official and parallel market will encourage thesmuggling of goods into the country. In this case, the equilibrium price in theparallel market will reflect movements in the international price, the parallelmarket exchange rate, and risk costs. (The latter may be assumed to benegligible for the purpose of this presentation.) The supply of a good in theparallel market will be completely elastic at the price P*, which equals theinternational price multiplied by the exchange rate or the cost of importsmuggling represented by P*. Unofficial imports will be positive as long astheir costs are below the previous equilibrium price under strict rationing. InFigure A.3, the new equilibrium price is P*, the same price that would haveprevailed in the absence of official prices. For this reason, the level ofimports MI in the parallel market is equal to M, or the level of imports thatwould have prevailed in the absence of controls. An increase in the black marketexchange rate will be reflected in a higher price P*', resulting in a reductionof the level of imports.

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Figure A.S Narkt Eq4iL1briv WS.tb Like4 &I Wiedow

Parallel market Official market

P TS

,,, _ _ ~ ~~_________ _ _k4 P164 "I 0 n U

CEAPMTR 2

PUBLIC ViEWcUs

2.1 ThPis chapter examines the public sector's role in the economy ofAngola.3 It provides an overview of the public sector (Section I), includinga discussion of institutional aspects and a description of the budgetary process(Annex 2.A). A brief description of budgetary accounts (Section II) is followedby a discussion of the measurement of budgetary operations, taking into accountthe large distortions in the economy (Section III). The need for adjusting thegovernment accounts stems from the fact that a kwanza that is attached topurchasing rights cannot be equated to one that is not. More accuratemeasurement of the budget can give policymakers better information on therelative size of the government, the budget deficit (a crucial variable), and thecomposition of revenues and expenditures (important for specific policymeasures). Some general, highly tentative thoughts on the relationships betweenthe budget deficit, the exchange rate, and prices are also provided (Section IV).Finally, the 13 largest public enterprises are analyzed, and a consolidatedfinancial statement of the parastatals is presented, with the accounts adjustedfollowing a methodology similar to that used for the budgetary accounts (SectionV). A simulation exercise is also carried out to study the impact of changes inthe real exchange rate on the accounts of these parastatals.

2.2 This chapter does not provide comprehensive recommendations on fiscalpolicies. However, we think that improving the measurement of budgetary andparastatals accounts is the first step needed for future analytical work on thesubject. Moreover, the chapter contains some conclusions that could be crucialfor future action. First, the relations between the oil and diamond companies(SONANGOL and ENDIAMA) and the government budget need to be made moretransparent. This would allow, among other things, an increase in their possibleprofit transfers to the government. Second, adjustment of the government budgelresults in shifts in several important items: the government accounts for 3vpercent of GDP, not over 50, as originally thought; the budget deficit, althoughlarge, is 12 percent of GDP, not 22; and oil revenues represent over 98 percentof total revenues, not 50 percent. The composition of expenditures also chang.,but not as radically as that of revenues. Third, any reduction in expenditureswould probably require a reduction in the wage bill and in extrabudgetaryexpenditures (mainly war expenditures), which together constitute more than 50percent of the total. Fourth, the surplus of the 13 largest parastatals dropsfrom an amount equivalent to 7 percent of GDP to 1 percent of GDP when measuredin a realistic manner.

S. AN OVUVX3W OV TM PUBIC SCTOR

2.3 The public sector includes the central, provincial, and municipalgovernments and state enterprises. The major state enterprises are under thecontrol of the sectoral ministries, which approve their annual plans, and theMinistry of Planning, which oversees their budgets and operations. Some smallenterprises operate under the control of the provincial and municipaladministrations.

2.4 The central government budget includes the budgets of the provinces andmunicipalities and appropriations to cover the losses, subsidies, capitalcontributions, and investment expenditures of state enterprises. However, thebudget does not provide a complete picture of central government operationsbecause it does not include interest payments, and expenditures financed withforeign resources are only partially included. The central bank is responsiblefor servicing the external debt, but the classification of debt servicing

30 While we were able to obtain information on and to form a general view of the government, wewere able to gather only partial information in public enterprises.

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payments in central bank accounts is not adequate to allow a determination ofdebt servicing payments attributable to the central government. As for domesticfinancing by the government, central bank records show a much higher level ofinternal debt than do the records of the Ministry of Finance, which suggests thatthe level of extrabudgetary expenditures may be higher than recorded by theMinistry of Finance. These account deficiencies imply that the deficit figurederived from budget execution data grossly underestimates the pressure onaggregate demand exerted by the excess of government expenditures over revenues.

2.5 Information on public enterprises is very weak, as is governmentfinancial control over these enterprises. In an attempt to restructure thepublic enterprises, the authorities are conducting a survey of their financialcondition. In addition, the government announced that public enterprises willbe included in the general tax regimen and that budgetary subsidies will beeliminated, except for essential public services. At present, the governmentsets no limits on domestic or external financing by public enterprises, nor doesit provide guidelines for analyzing their budgets or monitoring their economicand financial performance. No consolidated figures are available on publicenterprise operations, and no controls have been established for stateparticipation in the enterprises or for supervision of the distribution ofdividends to the state. Moreover, the Ministry of Finance has limited power overSONANGOL, the national oil company, with respect to profits for tax purposes andthe transfer of after-tax profits to the government budget. The same weaknessappears to apply in the case of ENDIAMA, the diamond company.

II. N BUDGNARY ACCOUNTS

2.6 Because information on public enterprises is incomplete it is notpossible to derive a comprehensive financial picture of the public sector.31/Table 2.1 shows an estimate of central government finances for the period 1987-89. (A more detailed description is provided in Annex 2.A of this chapter.)

2.7 If the amount of domestic financing is taken into consideration, thegovernment is incurring larger deficits than suggested by the budget. This isthe result of extrabudgetary expenditures related mainly to interest payments andadditional defense expenditures. Given the amount of the debt, it was possibleto separate interest payments from defense expenditures. As an example, theaccounts for 1989, including extrabudgetary expenditures, are shown in Table 2.2.

III. or BUDG!ARRY OPlRmI"ON8

2.8 In effect, the government collects its taxes and pays its expenses intwo currencies: kwanzas that have attached buying rights and give access to hardcurrencies o; goods, and kwanzas that can be used only in the parallel market.A ministry with the budget to hire some personnel will not find anyone willingto work for official wages unless some buying rights are also offered (atparallel prices, wages are ridiculously low). There are, therefore, strongkwanzas (S) and weak kwanzas ( ), which are related according to the formula

(2.1) S - nW,

where n is the conversion rate between strong and weak kwanzas. It is actually

31/ The current account balance of payments deficit for 1989 was estimated at US$20 million, or lessthan I percent of GDP. The private sector is still very small and its savings and investments areprobably negligible. It would follow that consolidated public sector savings would basically coverinvestments. In other words, the consolidated public sector deficit would not be substantial. Ifthat is the case, a large government deficit coexists with equally large enterprise profits thatreoain in the hands of profit-making enterprises, probably SONANGOL and ENDIAMA. This is only ahypothesis because data on balance of payments are weak, the size of private sector savings andInvestment needs to be estimated, and the financial situation of public enterprises nepr- '- beassessed. Subsequent work will be needed to confirm the validity of this hypothesis.

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TABLE 2.1 ANGOLA: CENTRAL_GOVERNMENT FINANCES, 1987-89(billions of kwanzas)

1987 1987 1988 1988 1989Item budget actual rev.bud actual budget

Total revenue 70.0 62.9 92.0 73.3 81.1Tax revenue 41.4 46.8 54.1 45.1 61.0Taxes on oil companies 25.0 32.9 34.5 32.5 38.0Taxes on international trade 4.7 3.4 5.6 3.5 6.8Taxes on income/profits 3.7 4.4 5.2 3.4 9.2Taxes on goods and services 5.5 3.8 6.5 3.8 6.1Other taxes 2.5 2.3 2.3 1.9 0.9Nontax revenue 28.6 16.1 37.9 28.2 20.1

Total expenditures 77.4 87.4 105.9 95.6 109.2Current expenditures 72.2 76.4 84.0 79.2 89.1Wages and salaries 40.7 47.5 44.5 47.4 53.5Goods and services 21.2 19.7 18.4 24.4 20.2Subsidies and transfers 10.3 9.2 21.1 7.4 15.4Capital expenditures 5.2 11.0 21.9 16.4 20.1Capital assets 3.6Transfers 7.4

SummaryTotal revenue 70.0 62.9 92.0 73.3 81.1Total expenditure 77.4 87.4 105.9 95.6 109.2overall balance -7.4 -24.5 -13.9 -22.3 -28.1Domestic financing (net) 41.0 53.7 47.5External financing n.a. n.a. n.a.Domestic financing (net)

as % of GDP n.a. n.a. 22.Oa

a. The GDP figure has been very tentatively estimated at US$7.4 billion equivalent, or 222 billionkwanzas at the official exchange rate.

Source: National Tax Bureau; National Budget Bureau, Banco Nacional de Angola; and Missionestimates.

the ratio between parallel and official prices in a very broad sense thatincludes the prices of hard currencies. For indicative purposes in thisexercise, we will vary from, say, 10 to 66 (values consistent with parallelexchange rates ranging from 300 to 2,000).3 2/

2.9 We convert the budget for 1989 shown In Table 2.2 into weak kwanzas, thatis to say, parallel market price kwanzas. This "homogenization" of currencygives a more realistic assessment of the budgetary accounts and more accuratelycaptures the actual impact of "government" on the use of real resources. A moreaccurate measurement of the budgetary accounts can give policymakers betterinformation on the relative size of the government, the relative size of thegovernment deficit, and the composition of revenues and expenditures.

32/ a - (P/P) (which is conceptually the same as P of Chapter 3) where P are parallel marketprices and P0 are official prices (where US$1 - Kz 30 is the official exchLnge rate)

If P - 300; then n - (300/30)- 10.If 9 - 2,000: then n - (2,000/30)- 66.66.

In Chapter 3 w use a P/P 0 - 20 but such ratio refers to a more specific - and limited - basket ofgoods.

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TABLE 2.2 ANGOLA: 1989 BUDGET INCLUDINGEXTRABUDGETARY EXPENDITURES

(billions of kwanzas)

Total revenues 81.1Total expenditures 109.2Official deficit -28.1Interest on external debt -3.4Other extrabudgetary expenditures -16.0Adjusted deficit -47.5Deficit including extra budgetary expenditures

(0 of GDP) 22.5

Source: Mission estimates.

2.10 The following equation was used to adjust each budgetary item331 intoweak or market kwanzas

(2.2) -, a I + (1-a) I n,

where Z- is the adjusted budgetary item, I is the nonadjusted budgetary item,a is the proportion of weak kwanzas in the budgetary item, 1-a is the proportionof strong kwanzas, and n is the conversion rate between strong and weak kwanzas.

2.11 GDP can also be expressed in adjusted kwanzas (GDP*), thus allowing usto show the budget as a percentage of GDP*. Since GDP has already been estimatedin U.S. dollars, its adjustment into weak or market kwanzas is quite simple.

2.12 In estimating a, the following criteria were applied:

e All taxes on oil and all transfers from oil companies were considered,in a simplifying assumption, to be strong kwanzas. The reason for thisassumption is that these revenues are backed by dollars in the BancoNacional de Angola.

* All other taxes and revenues were considered weak kwanzas. We assumethat taxpayers, except for oil companies, pay their taxes afterbartering and "bridging" the official and parallel markets. Since weare looking at the real resources behind each budgetary item, it appearsthat payments to the government are all in weak kwanzas.

* The composition of each expenditure item in weak and strong kwanzas wasbased on the import component attributable to them (see Table 2.3). Forwages, that component was estimated to be about 35 percent (aee Chapter3). Extrabudgetary expenditures, debt service, and war-related paymentsare considered to include a 100 percent import component.

2.13 The results of adjusting the budget are shown in Tables 2.4 and 2.5 for1989; the deficit using parallel exchange rates of 2,000 and 300 is shown inTable 2.6. For illustrative purposes, we will focus on t.he results using theexchange rate of 2,000. We derived several conclusions from the analysis of theadjusted budget:

* The composition of revenues in the adjusted budget differs significantlyfrom that in the nonadjusted budget. Oii revenues represent 98 percent

3/ This Oxercise is, in a way, similar to the one on wage remonetization conducted in Chapter 3,but It pursues different analytical and operational objectives.

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TABLE 2.3 ANGOLA: FOREIGN EXCHANGE COMPONENT OF CENTRALGOVERNMENT EXPENDITURES. 1989 BUDGET

(percentages)

Foreignexchange

Item component

Service commissions 60.0Personnel training 65.0Medical supplies 100.0Medical services 100.0Other services 10.0Food 80.0External cooperation 60.0Scientific research 100.0Representation allowances 100.0Visitors and conferences 10.0Other current expenses 30.0Capital expenditures 60.0

Source: Ministry of Finance: and Mission estimates.

of total revenues rather than 48 percent (Table 2.7). The true dependence on oilrevenues is, therefore, underestimated in the nonadjusted budget.

* The composition of expenditures also changes, but not as radically asthat of revenues (Table 2.7). Wages remain the largest item.Extrabudgetary expenditures represent 24 percent of total expendituresrather than 12 percent and rank second instead of third.

* The budget deficit increases tremendously in nominal terms, reflecting,basically, the change in the numeraire. However, it decreases inrelative terms from 22 percent of the GDP to 12 percent of the adjustedGDP (GDP*) .47 While 12 percent is a more realistic estimate, it isstill worrisomely high.

o Adjusted government expenditures account for 30 percent of the adjustedGDP, not over 50 percent as originally estimated. It should be pointedout, however, that since GDP estimates include production forautoconsumption or nonmarketed GDP, 30 percent still indicates that asizable part of the economy is controlled by the central government.

XV. MM B32DGT DEICIT. RATE. AND PRICES

2.14 The adjusted budget estimates presented above offer a more accuratepicture of the budgetary situation for 1989 than the nonadjusted estimates,particularly from the perspective of real resource mobilization. However, a moredynamic analysis is needed to assess the changes in the budgetary situationassociated with exchange rate and price adjustments. A highly indicativesimulation exercise carried out by IMF and World Bank staff shows that if a realexchange rate depreciation of 40 percent takes place, the budget deficit woulddecline by about 2 percentage points of the GDP. If in addition to the 40

341 The use of different conversion factors in line with different parallel exchange rates will notchange the budget deficit relative to adjusted GDP (GDP*) substantively. For example, the budgetdefleit varies from 12 to 13 percent of GDP*, depending on whether the exchange rate is 300 or 2,000.Since even "low values" for parallel or market exchange rates are considerably higher than theofficial rate, transactions in weak kwanzas become a small proportion of the total (see Annex 2.Bof this chapter).

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TABLE 2.4 ANGOLA: GOVERNMENT REVENUES AT PARALLEL PRICES. 1989

Unadjusted Percent Percent Adjusted budgetbudget in strong in weak

Item (M of GDP) kwanzas kwanzas Market prices Percent(kwanza bil.) of GDP

Total revenues 81.1 n.a. n.a. 2,576.4 17.4

Tax revenues 61.0 n.a. n.a. 2,556.3 17.3Taxes on oil products 38.0 100.0 0.0 2,533.3 17.1Petroleum output 11.0 100.0 0.0 733.3 5.0Profits of companies 14.0 100.0 0.0 933.3 6.3Other 13.0 100.0 0.0 866.7 5.9

Taxes on trade 6.8 0.0 100.0 6.8 0.0Customs duties 5.0 0.0 100.0 5.0 0.0Customs fees 1.6 0.0 100.0 1.6 0.0Tonnage tax 0.0 0.0 100.0 0.0 0.0Lighthouse tax 0.0 0.0 100.0 0.0 0.0Export duties 0.2 0.0 100.0 0.2 0.0

Taxes on income 9.2 0.0 100.0 9.2 0.1Industrial tax 5.5 0.0 100.0 5.5 0.0Labor income 3.3 0.0 100.0 3.3 0.0Capital income 0.4 0.0 100.0 0.4 0.0

Taxes on goods 7.0 0.0 100.0 7.0 0.0Stamp duties 3.5 0.0 100.0 3.5 0.0Petroleum products 1.0 0.0 100.0 1.0 0.0Beer 1.6 0.0 100.0 1.6 0.0Other 0.9 0.0 100.0 0.9 0.0

Nontax revenues 8.3 0.0 100.0 8.3 0.1Transfers from nonfinancial

public enterprises 4.8 0.0 100.0 4.8 0.0Property income 2.5 0.0 100.0 2.5 0.0Transfers from mixed

enterprises 0.5 0.0 100.0 0.5 0.0Other revenue 11.8 0.0 100.0 11.8 0.1

Memo items:Market exchange rate 2,000.0

Official exchange rate 30.0

Ratio of market to official exchange rate 66.7

GDP in U.S. dollars (billions) 7.4GDP in kwanzas (billions) 14,800.0

Source: Ministry of Finance; and Mission estimates.

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TABLE 2.5 ANGOLA: GOVERNMENT EXPE;NDITRES AT PARALLEL PRICES, 1989

Unadjusted Percent Percent Adjusted budgetbudget in strong in weak

lm of GOP) kwanzas kwanass Market prices Percent ofItem (kwanza bil.) GOP

Total expenditureIncluding extrabudgetary 128.6 50.7 49.3 4,408.6 29.8Excluding extrabudgetary 109.2 43.7 56.3 3,241.0 21.9

Current expenditures 89.1 40.0 60.0 2,429.0 16.4Personnel 53.5 35.0 65.0 1,283.1 8.7Salaries 43.5 35.0 65.0 1,283.la/ 8.7Other compensation 4.5 35.0 65.0 1,043.3 7.0Travel 4.2 35.0 65.0 107.9 0.7Training 1.3 35.0 65.0 31.2 0.2

Goods 8.4 62.5 37.5 353.2 2.4Fuel 2.9 100.0 0.0 193.3 1.3Repairs 2.7 30.0 70.0 55.9 0.4Medical supplies 0.8 100.0 0.0 16.6 0.1Durable goods 0.75 50.0 50.0 23.7 0.2Other 1.3 30.0 70.0 26.9 0.2

Services 6.8 65.4 34.6 299.0 2.0Food 4.4 80.0 20.0 235.5 1.6Linen, clothing 0.8 30.0 70.0 16.6 0.1Medical services 0.3 100.0 0.0 21.0 0.1other services 1.3 30.0 70.0 26.9 0.2

other current expenditures 5.0 37.5 62.5 129.0 0.9Foreign cooperatives 1.2 60.0 40.0 48.5 0.3Scientific research 0.1 100.0 0.0 6.7 0.0Representation 0.0 100.0 0.0 2.5 0.0Conferences, etc. 0.4 10.0 90.0 30.0 0.0Other 3.3 30.0 70.0 68.3 0.5

Transfers 15.4 34.5 65.5 364.7 2.5Pension benefits 0.2 0.0 100.0 0.2 0.0Losses of state enterprises 0.0

Price subsidies 0.0

Other subsidies 15.2 35.0 65.0 364.5 2.5

Capital expenditures 20.1 60.0 40.0 812.0 5.5Interest on external debt 3.4 43.7 56.3 100.0 0.7Other extrabudgetary 16.0 100.0 0.0 1,066.7 7.2

Deficit includingextrabudgetary expenditure (47.5) 20.4 (1,635.8) (12.4)

Deficit excludingextrabudgetary expenditure (28.1) 18.4 (474.1) (4.5)

a These figures differ slightly from the estimates in Chapter 3 largely because of the allocationof military and public enterprise wages.

Source: Ministry of Finance: and Mission estimates.

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TABLE 2.6 ANGOLA: ADJUSTED GOVERNME#r DEFICIT, 1989(trillions of kwanzas)

Xwanza/dollarexchange ratea1 Deficit Percent of GoP

2,000 1.8 12.4300 0.3 13.2

a. Parallel market rate.

TABLE 2.7 ANGOLA: STRUCTURE OF "ADJUSTED" AND "NONADJUSTED" BUDGETS, 1989(billions of kwanzas)

Nonadjusted Adjusted

Item Kwanzas Percent Rank Kwanzas Percent Rank

Revenues 81.1 100 2,576.4 100

Oil 38.8 48 2,533.3 98

Nonoil 42.3 52 43.1 2

Expenditures 128.6 100 4,408.6 100

Personnel 53.5 42 1 1,283.1 29 1

Goods and services 20.2 16 2 781.2 18 3

Transfers 15.4 12 3 364.7 8 4

Capital 20.1 16 2 812.0 18 3

Interest on external debt 3.4 3 4 100.9 2 5

other extrabudgetaryexpenditures 16.0 12 3 1,066.7 24 2

Deficit -47.5 -1.832.2

Source: Mission estimates.

percent real exchange rate depreciation, government re .1 wages drop by 10percent, the decline would be 4 percentage points of GDP.N/

2.15 Active budgetary policies could further reduce the budget deficit. Sincethe wage bill and extrabudgetary expenditures together constitute more than 50percent of total expenditures, active policies to reduce the budget deficit willmost likely require some reduction in those items. Personnel expendituresaccount for 8.7 percent of the adjusted GDP. Cutting them by 10 percent wouldreduce the deficit by somewhat less than 10 percent. An assessment of thespecific sectoral dimension of expenditure reduction, however, requiresadditional work.

3sr Por the public sector as a whole, including the financial sector, it is generally agreed thatthe impact of exchange rate movements on the nominal deficit depends on whether or not the publicsector is a net user of foreign exchange resources (see Annex II C). (See J.S. Lizondo, MultipleExchange Rates and Black Market Exchange Rates, A Non-technical Survey of rheoretical Results.University of Tucuman, Argentina, mimeo, 1990).

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2.16 Chapter 3 shows that wage remonetization is neutral vls-h-vis the nominaldeficit of the consolidated public sector because the gains to parastatals fromprice liberalization would compensate for the additional expenditures by thecentral government on wages. That means that the consolidated public sectordeficit would not increase if, in fact, price liberalization and wageremonetization were strictly synchronized; however, this might be difficult ina case such as Angola's. Moreover, given the increasing autonomy of parastatals,and the eventual privatization of most of them, it is appropriate to assess thebudgetary situation separately, as is done in this chapter.

V. A CONSOLIDATHD AOCOUNT PoR -=B 13 kARGUS! PUBLIC 3U!BRPXSZSU

2.17 This section presents two tentative consolidated nonadjusted and adjustedaccounts for 13 of Angola's largest public enterprises, disentangling the cross-transfers tg ween the general government budget and those publicenterprises. 3' It also presents the results of a simulations of the effectof macroeconomic policy changes (affecting the real exchange rate) on theparastatals' accounts and draws some conclusions about the fiscal implicationsof the transfers betweer the general government budget and theseparastatals. N/ The consol dated adjusted account takes into considerationparallel market prices, whici measure the real revenues and expenditures of theparastatals.3 81 The instit Aional setup of the public enterprises is describedin Annex 2.D; the assumpt ns used to calculate the accounts are presented inAnnex 2.E. The statisti,al appendix at the end of the report contains thedetailed accounts of the 13 enterprises.

2.18 The analysis shows that in 1989, these 13 state enterprises generatedan overall operating surplus of about Kz 15.6 billion or 7 percent of GDP (atofficial prices, including transfers and subsidies) and contributed net transfersof about Kz 29 billion or 13 percent of GDP to the general governmentbudget.39/ However, this surplus in kwanzas is misleading: it does notcorrespond to an effective use of resources because of the overvaluation of thekwanza. Properly measured accounts - using the methodology explained in SectionIII of this chapter - would show that this surplus is reduced to 1.4 percent ofGDP at parallel market prices. However, a simulated account for 1989, based onthe assumption of an official price hike of 3,000 percent and a devaluation ofthe kwanza to the parallel exchange rate (2,000 Kz - US$1.00), shows a netsurplus for these 13 enterprises of about 3 percent of GDP (at parallel marketprices) and net contributions to the general government budget of about 6 percentof GDP.

A. Public Unterprises in Anoola

2.19 The 500 or so public enterprises in Angola in 1989-90 were responsiblefor almost all significant economic activity in the modern sector of the economy,

36t Annex 2.E presents the methodology and assumptions that were used to separate imported anddomestically produced inputs in the parastatals' accounts. The choice of 13 parastatals was dictatedby the availability and reliability of data. However, the sample covers the largest 13 publicenterprises.

37/ As explained before, accounts in current kwanzas at official prices are very misleading giventhe degree of distortion associated with the current macroeconomic setup in Angola. Official saleprices and input prices (domestically produced or imported) do not reflect opportunity costs for theeconomy. One of the possible ways to circumvent this difficulty is to simulate the accounts usingshadow prices. In the absence of adequate shadow prices for Angola, parallel market prices were usedas a proxy.

38/ Using a methodology similar to that in Section IV of this chapter used to "adjust" thegovernment's budget.

39 Adding to the overall operating surplus (overall profits minus operating losses, which areassumed to be transferred entirely to the general government), the difference between transfers(taxes, etc.) from the parastatals to the general government minus general government transfers tothem.

- 33 -

with the exception of the oil sector, which is controlled by private foreigncompanies. 40 / A recent census by a unit of the Ministry of Planning covered1,887 enterprises, of which 517 were publicly owned. The census identified 83large enterprises, of which 67 are public enterprises, 205 medium-sizeenterprises, and 1, 599 small enterprises (Table 2.8) .41/ This section dealsessentially with the 13 largest public enterprises.

TABLE 2.8 ANGOLA: ENTEBRP TYPEOF OWNRSI. 1209/722

Size Private Public Total

Large 16 67 83Medium 38 167 205Small 1,296 303 1,599

Total 1,350 537 1,887

Source: Gabinete de Redimensionsamento Industrial, Ministry of Planning.

2.20 Sectoral distribution and employment in public enterprises have notchanged significantly since the late 1980s. Most public enterprises (almost 50percent) are now supervised by the newly merged Ministries of Internal andExternal Trade and Industry. The Ministries of Energy and Petroleum, Transport,Agriculture, and Fisheries also administer some parastatals. Formal sectoremployment in industrial enterprises (public and private) is estimated at about376,400 workers.

2.21 Total value-added (about Kz 22.8 billion)421 for the 13 major publicenterprises in 1989 (Table 2.9) accounted for about 10.4 percent of GDP atofficial prices. These enterprises employ about 45,000 workers, or 7 percent oftotal employment in the formal sector.

2.22 Angolan parastatals can be dividqd into four groups according to functionand relative use of foreign exchange:4 (1) foreign exchange providers (theoil and diamond companies), (2) the balanced group (manufacturing companies), (3)utility companies, and (4) net users of foreign exchange (transport and servicescompanies and the remaining parastatals). These four categories are wellrepresented by the 13 largest parastatals.

2.23 Two companies are the major net providers of foreign exchange in Angola:SONANGOL is an oil distribution company. It has no extractive activity but hasa monopoly on the distribution of oil products and is responsible for contracting

40/ For a detailed analysis of the institutional organization of economic management in Angola until1988, see Angola - An Introductory Economic Review (Report No. 7283-ANG), The World Bank/UNDP, June26, 1989, pp.10-32.

41/ The enterprises, called Unidade Economlca Estaduais, or economic units of the state, areclassified as large, medium, or small on the basis of number of workers, sales turnover, capitalassets, and other criteria. However, the final result is correlated with the number of workers:large enterprises are those with more than 500 workers and small enterprises generally have fewerthan 50.

42/ Assumed here to equal the sum of total personnel expenditures and operating surpluses.

431 The operating balance in "convertible kwanzas" (kwanzas that have a counterpart in convertiblecurrency) in Table 2.9 tells which parastatals are net users of foreiqn exchange. This is a resultof the breakdown of revenues and expenditures into external and domestic components. It can beassumed that the remaining parastatals - for which we do not have accounts - are net users of foreignexchange, as a group.

- 34 -

TABE 2.9 ANGOLA: THE 13 LARGEST PUBLIC ENTERPRISES. 1989(millions of kwanzas at official prices)

Operating balanceEconomic Total Total Number of

Enterprise activity revenues expenditures Kwanzas Convsrtible workers

SONANGOL Oil 50,726 45,757 4,969 5.007 4,166ENDIAMA Diamonds 14,025 8,853 5,172 2,644 18,533TAAG Airline 10,361 6,291 4,070 (2,381) 5,939ENATEL Telecom 2,348 2.436 (88) (526) 1,733Porto de Luanda Harbor 1,592 882 710 116 4,464ANGONAVE Shipping 1,199 988 211 (459) 614ENE Power 1,171 1,150 21 (616) 1.981CERVAL Beer factory 867 1,082 (215) (612) 1,600CAFANGOL Coffee export 841 785 56 664 1,053ENSA Insurance 665 260 405 0 1,101PESCANGOLA Fishing 632 594 38 (40) 374EPAL Water 490 292 198 (57) 1,492CFL Railroad 359 299 60 (30) 1,693

Total 85,276 69,669 15,607 3,710 44,743

Source: Mission estimates.

and making all financial arrangements with the foreign oil companies operatingin Angola. ENDIAMA, a diamond mining company, has a monopoly on diamondextraction and is responsible for selling and distributing its own production.It runs several side activities as well (farming, clothing, others).

2.24 Parastatals in the manufacturing sector achieve an overall balance interms of their use of foreign exchange. They include CAFANGOL, a coffe.-exporting company that buys coffee from state farms and private producers,roasts, and exports it. Production is reported to be small, and the companyrelies mainly on stocks accumulated prior to Independence. Three otherparastatals in this group are CERVAL, a beer manufacturer, PESCANGOLA, a fishingcompany, and EDIPESCA, a fish-marketing firm.

2.25 Utility companies are net users of foreign exchange. Because theirforeign exchange allocations were severely reduced under the prevailingconditions of foreign exchange shortages, their relatively small operating lossesin foreign exchange do not reflect levels of spending in past years. This groupincludes, for Luanda province, ENE, the power company; EPAL, the water company;and CFL, the railroad company. It also includes ENTAL, the telecommunicationscompany for the whole country.

2.26 The other net users of foreign exchange are represented by the transportand services companies. TAAG, the national airline, has a monopoly on regulardomestic and international flights. ANGONAVE, a shipping company, has a monopolyon all freight departing from Angola. Porto de Luanda, the port authority,operates Luanda harbor. ENSA, an insurance company, has a monopoly on allinsurance transactions in Angola.

D. A Cousolldated Account for the 13 LaEs_t Parastatals

2.27 Preparing a consolidated account for the 13 largest parastatals is, atthis stage, a highly tentative exercise because of the poor quality of the

- 35 -

available data 4 4 / and the nqr 2.1 ange1l: voluo of 1rouct1oe, 1980-69degree of price distortionin the economy. Whatstands out in the analysis . g.S s. e.nai

of the Angolan situation isthe predominance of the twolargest companies, SONANGOLand ENDIAMA, in all re-spects: revenues, expendi-tures, operating surpluses, 180

and, above all, as provid- /ers of foreign exchange. e

Their performance as wellas their constraints - _-namely, world market export '

prices - are therefore i_

critical for the function-ing of the whole economy. .

1. Production, Employment, .0 'e. to" If"and Investment

O am. e *t 4 .0

2.28 The overall picturefor all parastatals indi-cates some worrisometrends: the volume of production dropped or stagnated during the 1980s in allsectors except crude oil (Figure 2.1). o t/

2.29 Despite the decline Figue 2.2 agola: Total Pareatatal Revenue by Sector, 1986-89in production, the employ-ment level in the formalsector remained constantsince employment seems to W

obey only administrativedecisions. Investment fig-ures for 1q80-86 show thattotal investment (in cur-rent kwanzas) rose fromabout Kz 25 billion in 1981to Kz 29 billion in 1986, i .although machinery andequipment purchases droppedfrom Kz 7.5 billion to KIz2.4 billion.

2. Revenues, Exoenditures.and Transfers

2.30 The overall reve-nues of the 13 parastatals -9 Vws go 55851 Ol 0

grew from Kz 48.5 billionin 1986 to Kz 85.3 billionin 1989. The two majorparastatals, SONANGOL and ENDIAMA, accounted for about three-quarters of total

44/ None of the accounts provides adequate figures on capital expenditures or has any informationon how deficits are financed. Interest payments are usually absent from the accounts, which provideno information on domestic or foreign indebtedness. Finally, transfers from and to the generalgovernment budget are poorly reported or inconsistent: some profitable enterprises do not paycorporate taxes while some loss-making firms are paying what appears to be corporate taxes.

45/ Data are not available for all economic sectors. Also, Figure 2.1 gives an estimate of thevolume of production at constant official 1980 prices that is a highly tentative approximation ofthe trends in the real economy.

- 36 -

revenues during 1986-89; the transport and services sector accounted for about15 percent, and manufacturing and utilities companies for the remainder.

2.31 Total expenditures Figur 2.3 angola: Total Pazantatal apoua4turo by Sootor,of the 13 parastatals rose 19s6-89from Kz 45.4 billion in1986 to Kz 69.7 billion in1989. The sectoral compo- ,* ***,**, *e ,,*,sition of expendituresmatched that of revenues(Figure 2.3). Tables 2.10through 2.12 provide de-tailed breakdowns of theconsolidated accounts forthe 13 parastatals.

2.32 Total transfersfrom the 13 parastatals tothe government budget wereerratic during 1986-89.They grew from Kz 10.5 bil-lion in 1986 to Kz 22.9billion in 1989. At thesame time, the parastatals .were subsidized by the gov-ernment in various ways 'tw's Vi tt - via,

(price, investment, andwages). Since no cross-transfers between para-statals were reported, any transfer from or to the parastatals are regarded astaking place with the general government. It is extremely difficult, however,to draw any conclusions from this analysis about overall public sector transfers.It is possible, for example, that the operating losses of the other 500 enter-prises might be offsetting the surplus generated by the 13 major ones.

2.33 Transfers to and Figure 2.4 A.pgola: Not rmafera frem Parastatala to thefrom the general government GrvrNat, 1986-89budget also need to be ana-lyzed in terms of foreignexchange. Figure 2.4 shows 1 1** l

net transfers to the gov- *erinent budget from the 13parastatals broken downinto current or weak kwan-zas and convertible orstrong kwanzas and by eco-nomic sector. The role ofSONANGOL and ENDIAMA (grouped together in theoil sector in Figure 2.4)is crucial, since they arethe only parastatals thatare net providers of for-eign exchange to the gov-ernment budget. Thetransfer process is not | * *' *.| UP 4; la 44

fully transparent, however. 2Public enterprise are | e9 '

supposed to surrender any |revenue in convertiblecurrency to the centralbank, yet SONANGOL and ENDIAMA are reported to have some flexibility in theamounts they effectively surrender and in the timing.

- 37 -

C. NEasMuxu@ eaSl Resouzoe Mobilisgtion fox the 13 Parastatal8

2.34 The consolidated account for the 13 parastatals was also converted intoan adjusted account, using the same methodology and assumptions that were appliedto the government budget in Section III. This consolidated account for the 13parastatals at parallel market prices (Table 2.13) is consistent with thegovernment budget at parallel market prices presented in Tables 2.4 and 2.5.However, since not all the parastatals are included in Table 2.13, we did not tryto consolidate the government budget and the account for the 13 parastatals.

D. EffetM of Policy Chamcs oan Paastatal AccoQBts

2.35 This section presents the results of simulations of the consequences ofpolicy changes on the adjusted accounts of the 13 parastatals. Considering theprice distortions in the Angolan economy, the key issue in assessing the roleplayed by these 13 public enterprises in public finance is whether they wouldcontinue to generate operating surpluses were the real exchange rate to de-preciate substantially (were both domestic prices and the nominal exchange rateto move substantially). Although it is difficult to predict what the firms'behavior would be in an environment where prices served as market indicators, onecan try to simulate - other things remaining unchanged - the changes in theiraccounts for a given set of assumptions. The crucial assumption concerns themagnitude of the real depreciation of the exchange rate.

2.36 For this exercise, we assumed a uniform price increase of 3,000 percentfor all goods and services and a devaluation of the kwanza to the level of theparallel market exchange rate (about 6,700 percent). We did not examine thedynamic consequences of this depreciation; relative prices in the economy staythe same. This depreciation of the real exchange rate of about 230 percent isconsistent with the belief that once certain policy measures are introduced(remonetization of wages, liberalization of domestic official prices and foreignexchange operations), domestic prices will be stabilized at the level of presentparallel market prices.

2.37 The results of the simulation are shown in Table 2.14. They show thatthe overall operating surplus of these 13 parastatals in 1989 would shrink from7 percent of GDP to 3 percent but would still remain substantial at Kz 343billion (US$171 million). Transfers to the general government budget would, beabout Kz 823 billion (US$411 million).

2.38 Little is known about the other 500 parastatals, so no positiveconclusion can be drawn on the basis of the analysis of the 13 public enterprisesexamined here. However, it is likely that most of the remaining firms are loss-making enterprises. In that case, part - if not all - of the operating surplusof the 13 largest enterprises would simply be offset by the losses incurred bythe other 500 firms.

- 38 -

TABLE 2.10 ANGOLA: CONSOLIDATED NONADJUSTED ACCOUNT FOR13 FARASTATALS. 1986-90

(millions of kwanzas at official prices)

I-bi: ALL. PTA7TA year I 196 195 196 *9o iwo I two 190 a90 tw 190Wi14.) I Nws. Mi Mm. UN Iwb. U ti k. Wi ios:. UN Ilot :raet Kuses ("M ilow)

1. Tetel rewave C1I1. to 1.4.) 24,000 26,870 185.166 86.155 6 ? 40.,0 89,051 45.45 46.8" 9.1152 149.58 61.1, 76,516 se.275 8,005

1.1. caarwm c0e0sa 21.97t 20.00 1W,M16 0.606 1,0o* W 30,41116 46i.4351X J 028.2 142,8561E .0650.10 7*.08M 7i,44811.1. sal. (0 & 6) 21.14, WON66 20,418 84,215 5.3 87.5 Iso71 44.80 S4., sr.68 18s.88.a6 d6.81 78.0n 7n,M1.1.2. tither reweave 64 1.7 1.7ft 480 1.6o 00 1.700, 1.05 2.O 1o8n I 2.61 ,191 2.7 1.81 8.79

1.a. Caere" Owafte 2.684 0 SM 0 8.09" 0 9.0 0 *,8Jw 01 2.0 a 6 i,0 6.94 9.10 *,8n1.2.1. 0.'. p4.ts eat.r I 0 0 0 0 01.2.2. trm p.661 seat" 2,66 0 0,010 0 0,0 0 0 9,8 0 9,81 01 26 6.50 , * .O 88 9.866 0.3

1.2.2.1. price asboiie I 0 0 0 0 01.2.2.2. othe eabeldiec 1.4 0 6,060 0 0.0, gone0 ,M 2,8 0,00 , .ee4 9.o, 9,866

1.2.8. from eicu 0 '0 0 0 0I.& C40tsIreweave 0 0 0 0 0 0 0 0 0 Of 0 0 0 0 0

1.8.1sICotal frewe 0 0 0 0 0 0 0 0 0 0 0 0 0 0 01.5.1.1. fron pCi"O eater a ° 0 0 0 0 01.3.1.2. frm bIiacmater 0 0 0 0 0 a 0 0 0 01 0 0 0 0 0

1.8.1.2.1. l1__st.at fund 0 0 0 0 0 0 01.8.1.2.2. ewitel 1acem 0 0 1 0 0 0 0

1.8.1.8.t r *rmabs 0 0 0 0 I 0 0 0 0 01.4. Other scesec 0 4,05 1.,69 2.640 4.M 1.61 2.85 0 0

S. t.w0 araedIture & MA edl 5.86612.1 11 .891 2.901.O , = 0 M2ot,21.0 41.712 25.441 4,8i4 146.41 3.S559, 457 09.668.6

2.1. 0rcat xpea.dltou 1.80 .5.80 55.85 205.9 WI.N 78042 7.5 40.1U4 26.680 819. 142,074 54,40 5,662 67.77 64.82.1.1. oestlao oupeuditera 12.105 ,79,nt 18.111 19.S83614099 12.66 012729 .6004 18.10 66.701 180.9, 11,417 8W.4 44.88 4a.M62.1.1.1. Per_1ai 4.,0 2,165 4,60 1.18 4.86W 2.215 4,710 2.497 4.788 1.84, I 8,890 T.10811 7.20* 6.7162.1.1.1.1. _uec 4.05 WS0 4,84 90 4,3 95 4,468 1.110 4.80 1.05 i 4.1 8,40 8.215 S.576 54042.1.1.1.2. Othr_ team. l 1,16 O 1.00 266 1*06 21 1490 U1 1,182 I 1,W5 1.M 1.860 1.837 1.1851.1.1.1.8. Toksakl slet. 1 us 4 191 2 U o 8 2 11 I la S2 8 91 'US

2.1.1.2. Iatdersdiat i.to 2,40 18.184 5,189 18.40 6.0ft 19,911U 6.46t 11 eI.0 T.0 77 s.ea 110.506 2 1.011.2592.564 2.9102.1.s1.2.1. R.. 0~1so 1.406 10.289 8.$.ll 11,142 ?8419 12,08 8.7V 1.7 8.85 I8,845111.85 14.784 1540 13.405 17.3552.1.1.2.2. Otbor oae" 69 4,10, 1.075 4.M 1.060 0.W 07O 4.90 1.85 So= I 4. 6,86 ?.o .8 6.9662.1.1.2.. i_.r 8*. 1,85 1,11t 98t 1,5f 1.819 1,651 1.43 2.061 1,951 I 1,9950 2.07 8,475 8,249 $.SW7

2..1.8. AmrOistoI. 8.484 469 .8 81U 416 SW 1,871 11.01I 1.851 9.41 I 5.5 0.074 4.011 12.85 U1.12.1.2. Iatsr_b _ovast 40 6 so 8 n1 o SO94 8 40 7 I 0 0 a SW 1212

2.1.2.1. Fi_a,. dearS. 4 . 41 0 21 0 so $ 0 45 01 40 6 8 39 4118s2.1.2.2. finane. dergo fte 0 0 96O 790 0 45 0 779 me go 7Wn 45 779

2A.1.. Csrrew tru,sfm 7.890 *.149 12.405 5.6 1,066 0,014.1 0.066 11U.10 U 6 110 O.s40 le.09 17,19 22.S2 17,42.1.3.1.o. rivaita cat I 0 0 0 0 02S.1... to Ccntwal _e 7.80 3.00 ,9 2,o6 4.76 U1e.065 4. 4r l0 141421 2 .110 4.0 110.899 17,190 15,74 21.210 1X8.2.1.8.2.1. _a ?.SW 8,009 12.85 4.716 11,060 4,61 14766 04.85 11,074 4.*47 110.89 17.171 18.711 21.174 t3,12.1.8.24. rati_ .baOd-t 0 0 0 0 0 I 0 0 0 0 0*.1.8.2.8. assist ted a 0 19 0 OaB 8 so I a 1 as 86 8s

2.1.3.8. Os abrord 0 1 0 we 1.1 1,0"0 1.60 141 on 1.51 1.69 1.6992.1. Capital _ osmditur 783 2. 40 2.11 18 8.860 SW 1.6 790 $8." I 8,85 2A,U S.0 1. 4.48

2.2.1. fid eelite# foeatis 0 a" 0 O12 a I*" 1.001. 2900 8 I 85 "9S 1.10 1.18 8,862.2.2. Coital te.Aeer 0 0 0 0 0 0 0 0 0 01 0 0 0 0 0

2.2.2.1. to private ost, 0 0 I 0 0 0 0 02.2.2.2. toCestra Gope.ama 0 0 I 0 0 0 0 02.2.2.8. o abera 0 0 I 0 0 0 0 0

2.2.8. OUthr VW 2.844 40 1.05 11 2.840 8SO 441 86 SI 8,101 1.99 1,66 744 1.08

3. Corrm Sale... (1.S.- S.1.) .4A1 C1.900)(1.40) 6.75 1.* 0.41 1,0756.11 1.93 ($11 51 7.340 0.811 0.113 11,966

4. blsatiae ibleae (S. - 2.) 5,l06 OM) 4,80 ?.U 9,06 7.5 11,61 8,711 1. 1 ,1(4.180)1 8S. 1,11 17,3 3,0.90 16.05

S. metrs. par""etrrerI 0 0 0 0 0

*. Overall balesa (4. -56.) 8.6A0 ( 4., 7,86 9.00 7,5m U,9 8.711 21,1810 (4.831 81)5 12.12 17,85 I,S0= 15.8

7. P l.eoIeO I 0 0 0 0 07.1. Sateessi ~~~~ ~~ ~~ ~~ ~~~~~~~~~~~~~~~~I 0 0 0 0 0

7.S.1. p ls a 0 0 0 0 07.1.2. Pae 1 0 0 0 0 0

7.2.1. 6.N.A. I 0 0 0 07.2.2. Ce_lpelal boa. I 0 0 0 0 0

6. Cm;assy _oi 8.696 (85) 4.88 7.861 9,40 7.5 1.60 8,711 21.180 (4,l8)1 8.10512.12917,35 15,600 16.05

0. list tree OM (9.2 - 9.1 . 9.8) 9.064 2.010 10o,9 18.1 11,996 18.66 17.327 11.000 2.2, 2.019 111.85 26.57 2.7 0 219.1 1.9149.1 teers o be U..eL 2.01 0 0.0ao 0 .094 0 9.o0 0 9.19 0o 2.024 0.000 6,8a4 9.89 9.8969.1 1,aa.Ies, rom the U.E.LE 7.80 8.149 12,406 5.0 11.065 6.50 14.601 08.00 11.110 6.84 110.80 1.068 17.205 218909 17.4eo4*.S Cores of ors6teo lom. ,6_90 (6) 4.818 7,681U 9, 7.8W I1.69 8.711 21.18 (4.413) 8.10612.1 17,859 18.660 U10.0

Note: US$ means convertible kwanzas. For each year, revenues and expenditures were broken downbetween current kwanzas (Kz) and convertible kwanzas (US$). However, the convertible kwanza figuresare presented in kwanzas at the official exchanae rate. not in U.S. dollars. The column labeled "incurrent kwanzas" is the sum of current and convertible kvanza columns at official prices and at theofficial exchange rate. Figures for 1990 are projected based on trends for 1986-89.

- 39 -

TABLE 2.11 ANGOLA: CONSOLIDATED NONADJUSTED ACOUNT FOR13 PAMASATALS BY ECONOICi SECTOR. 19856-90

(millions of kwanzas at official prices)

COuSOLI -5*

VW , " tF 19r 1"B 199twt r(^". 15 Er a. KS lu". US (Ws. usS (was. U j

I. teZ|* a2,00 a$.s u.tS 9 36355 35.9 40.839. I.1 45.,5 46,638 39.213

Sam a0 gam ILtt .2 LW1! W5.101 36.4t MM^ 21.^R VAND t. 2. 2l,2 1 , t$tt_t C" co czn t2Rt my,> t s. *91 I.=2 m2 i.sia it?w imz7

tttNin 1. ttlW *I th 1.3O1 0 1.60% `31 I,a *40 1.104 On 1.40 ?3U?IUUttt CII. 3.SMS t1e 4,604 11t 436 140 *.231 133 1 14 13

t.1. t 'r04t * - u,rn. n,s31 tDW.91 80.5503 .1 .11 3V.M 53.18730.41 46 .48 3S .83 5sJ9.3

OWe mm.4 61 5 11.152 18.159 1W . .M 5S.073 3eR l 1 14.762 4 ."51 16. 181 3SO3TONSW & 159)033 8,031 10.519 67 8.11 1.S 13.396 1:,51 t1,? 1.91 !85110A13. 1581I8 1.33 0 1.895 9e 1.3 0 1.10 an3 i.4" t38uJTiLi?in cmS. 1,146 ISO 1.80v Ila 1.38 160 1.931 133 1,015 not

t.2. (rueful ff11 ths05 3*4 0 6.000 08 0 9.30t 0 9,3 0)

WI* 9W 4 63_3e 5n0 8.19 a 8 a40 0 r7.07 0 7,010 o8TI67S U 0 "m 0 0 0 0 0 0 a 0 a II_518. t In to 0 0 0 0 e 0 0 0 0U?T117188 Ctn. 1.430 a 2.317 o 2.4 0 a .313 0 2.3 ,

IS. Coital t r om I 85p 0 4.85 0 *.89" a 23.2 a 0 0 0o

T6?81V1033 0 0 e 0 0 0 0 0 c 0*5aC. 1 i6no.S a 8 0 0 0 0 0 o0

UTILITMCS. a 0 0 0 0 a o 0 0 0o

3. zg le,m 5.335.111 aL5.59ta, 1 38.64 21. 33.3 3.5 41.13 8.411 43,544...... ... ,.... .......................... ....... ...... ...... ...... ... .. ...... ...... ...... :

WV SOAO A zaIM 13.70 18.960 19.3 21.39 17.1? 31.401 1.311 15,300 15.535 a."?7.ti y a AM9C" 4.0 34 3 4.58 4.*ne 3.e 4.s60 4.158 4Q *410 r45

_.rnius 01% 0 1.019 089 1.35 73 1IA83 809 4 0 93UffLITfi CM. 3.17 400 3.11 1.36 2.9 1,35? MU04 1.382 3.906 1,39

3.1. outsitWWW -j~q vwmfU15599.300 16,141 5.339 11.39 25.474 ta.76 33.010 13.589 33.510

WV .S O s. tJG14.tW 7.43 1.133 t.,S 18.33 4.100 WI,N 4.189 370?"Wm9f M, & 10159381 4.011 4.34 4.490 4.113 3.77 SAN9 LOSS3 3.0 4.600 5015_a 8. 1f81 _8 U 43 1.36 O 9o i33 ,11 80 9oo 1.13 MuftilS o1n. 3.137 439 3.9 in 2.931 in 238.14 51 2.se 508

3.3. fumfwut to mbe du 7,39 3.14 146 5.05 11.968 1.80 14.031 80N 11.110 8.346,

WV I a 0a1ma11 6.3 3.140 15.79 S.815 1"0.35 6.30 14.351 8.038 10.4a1 6.346!to . G 41n_ 23 0 t1 0 1 0 9 0 7 0o

_ANN. ll_Zn S" . 06o e 40 o 4e a 4r oWSITM CIOL 0 0 0 a 6 4 a 0 4 0 0 e7 l

J. t, u6 reo t n aco M .1 40 A3 In 3.301 385 1.S 790 3.SA0

WV Wm . & 53 0*1.PA 0 I.53 0e .113 0 2 0 3 i39?41591U5 M? 41e 40 08 175 a" 38 479 no 23 t,

_MWM. t8A1 a 0 0 0 0 0 0 0 0 oWIt"I CM. 0 360 0 4 0 M 0 M 0 in

3. eutsit belin 9.r5 1.14911.O3 14*41? 13.15, 1.r716 t17,.9 13,S39 3.49 5 43.......................... .... .............. ..... ..... ..... ..... ..... ..... ..... ..... .....Wm _68503 & mum S.," 4.6 I.40 18.005 ?.M0 rs .e r 9.7e 4 15.90 I.3m 9e 3

t_t a 913s 4*.01 (3.013) 6.001 (S.)n *J11 (3.0) 8.495 623.44)13.194 (.03)l_101. ismutS 1,34 (*3m 433 13a 31 IN3) U Is NG 13

U?111.171 CIO. (9M) (3(1.15) (4500(,111 (435) (8) (4333(1,.00) (4

4L. OM?111 If. 0100 3468 (C3) 4.515 7.551 *.03 ?.53" 11.80% 3.711 31.169 (4.333)1................. ............... ..... ...... ..... ...... ..... ..... ..... ... .. .. .. .. .. ......... .. .. .. ..

WV mS .S MuM. (M6) 3nr (2.33)12.471 n ,5 13,154 3.s08 7.051 ?,M 32 ; I78_6 T 8 39 & 3 3.20 ( 3 401 C3.913) 4.*48 c3,33221 4.121 (3723)11.30M 0.3)1

na110111. sISlIC 89 ($ (18 13 (3) (8) ('3') 13 (191) -3)utiUits 01n5. 44 (4) 1,OU (1,m1 33S).1 t(1t1) 1,4c0 1,9)1 (1 .193)a1

S. u. twosefm (06"a a.308 3.140 6.40s 5.49 3.171 4,3 5.4.20 3 8.06, 1,712 6.36........................ .................... ..... ...... ..... ...... ..... ..... ..... .....-.................................

WV 68l03. 4 83658 6.16 3,149 7.910 5.4193 4,15 4.830 7.374 8,059 35.550t-854 =nag *1 0 10 0 1 0 9 0 r 0

_MM?W. 1155038 S9 0 41 0 48 0 440 0 47? a6untun CM. 1,45) 0 (3.31) 0 (tn ea3) (e.313) 0 (3.33) 0

Note: USS means convertible kwanzaa. For each year. revenues and expenditures were broken downbetween current kwantas (Xz) and convertible kwanzas (US$). However, the convertible kwanza figuresare presented in kwanzas at_th i. to. ot in U.rS. dollar.eprojected based on trends tor 1986-69. Transfere from the general government budqet (OGn) do notinclude coverage of operating losses.

- 40 -

TABLES 2.12 &.9A MOZAS OAJSEAC O13 - A TTL Y qlq l= 969

(percentages)

-~~~u M *M

~ACTUR.~~ tuo mts A 01LS A"9 *. ;.13 . .%I

httu) . *6 Et . II m. US gut. UD ur. WI

1. b _a- 160.01ee. 5e.56 % 0. 6.5 11 e0.3 10.0 tae.er L6.os 'u. .

Ohs UmW r 61 m 10 .463 901.61. 810.91 96.3% 19.81 93.111 16.91 too01 639.910 ,.I11*1001A .161111C0101 35.5 9.60 31.91 8.3 8.6 S.01 50.98 13.51 3.5 1..

OF*C11B. 153311.43 0.01 .11 SAS 5.6M 1.63 3.8 1.8 1.03 I.9¶

utLIIII @161. 10. C.A 18.1 0.3 11.0 0.3n . 0.53 1.9 L.A

1.1. et eowo # theGo 91.411 LO@ 61.9 G 0.3 7 9.53 6.3 t.0 MA.E 1.s

we, IW 6 mW s46. 76. 311A 9S.1 41.91 6. 3.T9 to .61 5s. O,11M a 6131011 . SA.3 .9 8 Lo.8 5.01 3.91 AS 3 L1 3 O.1.

8101*1110111. 1606015 1.4 0.602 .1S 3.61 OM6 1.61 5.81 1.81 5.6 1.91u?iLIV1I Cs"I. 6.8 0.4 .43? 0.9 16M 0.51 4.81 0.31 6.6 OM5

1.8. _Cm ff6 aGAs 16.43 0 .01 1.1 0.1 8.9 0.6 .1 9e.6 8 A 0.51 o.81

ohm saw" 4 SWIMS 8.43 0.01 11.43 011. .63 1 .81 0.81 1.51 0.0

?ImE1T 6 611ORI16 0.6 0.81 9.01 0.6 OM 0.8 0.81 0.81 0.81 0.51SWJIMI. IomI esIl 0.6 0.81 0.01 0.01 0.6 0.0 0.6% 0.6% 0.6% 0.011

1t519?t n eta. 0.6 0.6 0.01 0.8 0. 0.6. 0.6 0.6 0.81 0.61

8. a61eatw0 101 10." 100.6 100.6 180.61 10 1.0 100.01MA 160.01 " a

WiU 603*8 a mu1sA 68.6g 1343 07.5 18. 46.0 0.13s 09.13 06.61 61.113 7.1.5tl0Ul_ a = n.1 1.is 11.91; 16A. 1.1 1.9 16.91 10. a1.51 1.6

_67*11. iUisUIIII 5.13 8 6.1M 8.6 1S.1 8.3 1.eB 1 t.91 6 8.3lulftLttU ceta. 1o.11a1 La 10.43 6.1 11.5 4.e 10.111 LO 11.43 S.

8.. I Y W10f W.#. 19.93 IT. 16.e3 M.5 7.6 10.11 e.eB 76.e 15.3 7.

"iu s um e a maims 89.e.e3 161 S.5 1 1.5 . 11.6 1o.91 66s 1.= O.67r306 a 68a1 1.91 16.91 1.9S 16.31 14.63 11.6 1.61 9.0 10.1 1.1

PlMI. los" 0.5= 8.13 6.51 8.e S."3 L.S 6.5 1.91 e.43 L.34IITltI?lIS ClCS. 10.13 1.71 1o.43 .81 11.5 1.9s 1.1s 11. 11.41 1.511

8.8. ifusf 10603 M36.43 1L.M 43.44 19.6 48.5318.1 IS.6 19.43 43?1 14.61

ova sins. a mm U3.43 .11 11 1. 40.41 16.91 11.3 19." 61.A 16.111331043 a AMIC6 0.11 0.62 0. 0.5 0.81 0.81 0.01 0.6 0.8 0.0031*51. tom1S1 8.01 0.81 LO CA5 0.01 1.6106 16 0.6% 1.91 0.65

I_1UtM CM. 0.01 0.81 0.LO 0.81 0.01 0.6.01 0.81 0. 0.01

8.5. OwuLt P0303 a 3.91 10.5 01 0L. 0.1 0.8 1.5t ..n1 3.11 61.43

Wua o11 a wt" 0.6 7.8 0.8 1.5 r.es 0.01 6.3 0.6 0R 0.81 0.61t .o. tSM411.1 16 1 8.1s 01 8. 09 8,13 1.31 I.ll 5.11 6.1

0NLW1. 3613113 0.8 0.6. 0.01 08 0. 0.6 0.6 0.6 0. 0.UI.IIT CMII. 0.6 0. 0.81 R8S 0.8 8.35 6.81 1.8 0.6 1.

5. Pw v GM MS (1 of ras) 60.8 6.6l 3.S 309, 31.8 16.01o 4.43 8310 16.a10..~~~~~~~~~~~.. .. ............ .. .. ..

.1,minS 6SeW n.11 16.91 17.13 6.9.1I-$ 81.3 4.186.1 31.52 86.5 5.9"tIso a 11iCI 16.t1 4.0 1e.3 .es 16.31 .e6s4 e1.3e e.es1 e.e 7.0667511. tIsS t1.5 '8.3 1. 0.1 53 1.11 e.01 0.6 0.6 0GM1 e.e6

IttILITMi CtII. .11 .1.5 5.13 .1.3 e.1e e.11 *8.e 4.91 e.3es e.e

6. no stoo; 611060 Cs of Sf6330) 11.43 .8.52 13.81 80.64 87.5 16.13 89.91 0.5 61A61 .11.121

0/a 631*68815185 .8.91T 13.1 7.01 36.5 9.91 89.6 6.5 16".8R 16.43 7.1tiuNAs S 66161 11.4631.10.91 16.3% -10.1 011.01 .L6.130.43 .6.16 U.61 .16,1233I40?WC. 1*617336 8.6 *8.13 -.0.5 0.51 40.13 .0.34 *0.3% 0.6 0.41 aaUpILSIU _ CO. 1.9 -8 n 1.11 *3.11 5.91 *5.01 3.61 8. .8. ll 8.9

S. wt 60 a0 Cs r.ea U ." ) 1.81 19.51 11.91 6.6s 11.5 13.61 17.1 5.a 6.

0/U tils. 6 ...... .eS 18.6 86.13 11.9111 e.6 11.5 1.5 17.6 e.61 16.3["hUIU a URO 0.13 0 0. 0.6 L 0.81 0.01 0.6% 0.8% 0.81 0.08 0:0.6

MfiU. _11M 8. 0.8 1.91 0 1.5 0.8i 1 .5 Ills 0.6 1.01 0.0siUtill cmII. D6.6 0.81 .6.91 0.6 4.8 0.8 ".1. 0. 1.80 0.61

Notes US$ means convertible kwanzas. For each year, revenues and expenliturea were broken downbetween current kwan:aa (Kz) and convertible kwanzas (U0.$ *However, the convertible kwanza figuresare presented in kwansas te, got in *r." dla . Figures for 1990 areprojected based on trends or - .Al Pra"Na mera Ira e general government budget COG!) do not

imaud coverage of operatinq losses.

- 41 -

TAILS 2.13 l;O.A: CONS2LPM NRNMDTAACOUNT13 PARASIATMS, 1986-9Q

(billions of kwanzas at parallel market prices)

COUI@LISAI IOU swe miIIrns M PMMAIAL O a.ssc thu ms,11J163.080 Ut.

T.ew Im Pw "a lm lo"unitt() In a m Xrn in ttil ! )

1tou tems (1.1. to 1.4.) I.d6 23.4 3,3 3.107 3.69

1.l. ur.e ivsms 1 ,410 3,367 3,60 3.09 3.6I.t.t. SM (64 * ) 1,303 3,33 3.54 *.03 3,51t.l.L wa w to a 11a 33 6 7s 107? I

1.3. wI trmft a 6 9 9 9I.1.fwe f e:pre s u.w 0 0 0 0 0I.M. tc pbmi t 2 0 9 9 9

1.3.3.1. te* 0w o O O 0 0t.2.2.2.r* f*o a 3 6 9 9 9t.2j. *rw owed 0 0 0 0 0

13. ClGtat ot o 0 0 0 a 0

1.3.1.J. fC p fw seeom 0 0 0 0 0

1.3.1.2.1. iroIvst ewr 0 0 a 0 O1..1 p2.cit t int_ o O O O

1.3.1.3.fra8 0 0 0 0 01.4. otw VI II$ IM o 0

2. Tout sloue G noet tZ1ng 1,716 1,973 3.34 3,545 2,99 1........................ ... , 0 0LI. Outr 6 tss 1 $61 1,750 2,033 23.41 23.n8

3.1.1. tOperfns uewdlutw. 11201 1,10 1,16T 2,147 3.2 l3.1.1.1, su,st ISO 15 156 175 1 I33.1.1.1.1._sv 63 ai 9 4Q 7

3.t1.t.3a.Pheewm . 7r 7o 7n 67 783L.1.1.1.. 1mJtoeLt {Smt. 10 a3 16 6 73.1.1.3. 1iemed a% tpeAt 1.094 1,13 1,35 1'23 1,611

3.1.1.3.1. 3mR m late 693 7W 814 74 911.1.1.3.3. os sew 39 40_ 336 3 |3.1.1.3J. 1hw 113 66 1S 98 110

3.1.1. AwttIIp 3 43 3 4 013.I.3. Ietws OapeyMm 39 63 53 33 S3W.M.Ffa uI p tgs. 0 0 0 0 02*1.3. .Pam srn fte 9 a 3 n a.Wi. vt t trf*s 30 39? 43a 561 4O

3...1 pr1vswsesu 0 0 a 0 03.1.3.3. to Omnirh eso u 311 3O6 O O4 3351.1.3.3.1 towns 211 35 37 46 53.1 .5.3.3. EtUIweW,t 0 0 0 0 04.1J.23j.s1et 0 0d O 0 0 0.1.JJ. sto Xru Is 61 105 115 11s

2.t. Celat gpid 175 194 43 104 36*.2.1. U19 041"1 smatig 16 a 70 4 30LLL 3cvpitst trrnfot a 0 0 0 0 3331to petwI.o wr 0 0 0 0 03I.3.3.3toGsn*rI4 rrnit a 0 0 0 0.J.3J.e a to 0 0 0 0 0L3.3.. cw 15" 133 1I s0 39

J. ewet tawae M11-, I.I.) (131) mes 17 W 05J4. q>uiqg Gew (1. 3 . (33) 514 519 33 (7

I. intsrpt * wtws 0 0 0 0 0

6. @uts PIous (4. 5 S.) (32) 14 s1t sa (3t7)..... ........ . .................................. ...........................

1. teru .~~~0 0 0 0 0

UP IR WTsr Uwos (SlUtie1) 13.49 155 166.67 10.360 19,111

UP at dffici a primP as prltei, Savl pr'e *0.38 3.15 9,1111 1.43 .1.4

9.00 tPOWiM (9n.9 * 905 951 614 159.1 tumsfer tot U.U..0 e 6 ' §9.3 t frs fne i V..s t21 3 5 11 449.3 Oesws of am asiq 1s_ (33) 514 519 3s (31")

- 42 -

TABLE 2.14 A DLh: A.SuLaTE CONSOIATED ACCOUNT FORTHE 13 LARGEST-PASTATALS. 1286-20

(billions of kwanzas at adjusted prlcea and exchange rate)

coSSOI,IATtoUt t Simtdt accoutn_M: ALL PEMAIIS t0.pwica i 30 tius.12.000 ,

19, 196? 1911 1989 1990Unitt) , in curms ItS (Billion)|

1. total rove" (t.l. to 1.4.) 2,350 3.450 3,836 4,263 4.04?.............

I.1. csr,wt r w I 2.047 3s,1s 3,m 39 91 3 0.75 1.1.. sael (t a 1) 1.09 3.043 3.276 3.856 3,"2i.1.2. OtIw fevuw I"0 112 mIS 125 172

1.2. Cirrent traufers 61 1t0 267 282 1.2.1. f*a pi*mte sftw 0 0 0 01.2.2. ft puli setoi 61 ¶3 27 5 U251

1.2.2.1. pries sidla 0 0 0 0 GIt.2.2.2. other vA1id1n 61 1S 267 22 202 1

1.2.3. few tu , O O O O1.2... otlo*smd j O 0 0 0 O I

I.3.t apital a 0 0 0 01

1.S.1.2.1. invecn fwi 0 0 0 Of1.3.1.2.2. etat in!r. 0 0 0 0 01

1.3.1.3. from rI - 0 0 0 0 011.4. tor rvm Jt15 178 0 °

2. tout pndi1twre & Mt lenif 2,305 2,803 3033 3.665 3,70j............................... I...........................

2.1. Iwrent bpI dltAt 2 1o 2.608 2.75 3,541 3.4332.1.1. _trafm I9UfluitWrs 1,6t2 1.7 1.98 2.516 2605

,.1.1.1. Pet 7ml 297 269 310 2903.t.t.t.1. _ s 179 199 194 209 2042.1.1.1.2.oh rewm. 83 19 79 95 ?B2.1.1.1.3. Tchnicat mist. 11 20 16 6 S

t....tntOwwa te 1 1,164 1,287 1.526 1.41l t,6t°:3.1.1.2.1. I _N ateoal 8a 913 96 t02

2.t.1.2.2. 01km - I 324 439 361 421 I2.1.t.2.3. 01m 122 n 8 115 151 170

2.1.1.3. Aeatintfon I t" 23 163 r9t 69

2.1.2. Interet Fl 41 64 54 34 62.1.2.t. UIri'g oI' :e h . 1 1 t 1 1312.1.2.2. Pi a . dwm to 39 63 53 33 53

2.1.3. ourc t tt fwo 434 757 M3 99t1 722.1.3.1. to pivet senor 0 a a 0 a02.1.3.2. to Cantra* Scnme 425 695 640 876 647

8.1.3.2.1. tones 425i 69 6T 875 662.1.3.2.2. romitco 4O*t i 0 0 0 0 02.1.3.2.3. socies t fw 0 I I I 1

2.1.3.3. to d 10 61 105 115 11S2.2. tWal zdtwe 19? 195 246 11 271

2.2.1. Fixed Capital tWtian 16 62 n 75 2182.2.2. Cpitat trafer 0 0 0 0 O

2.2.2.1. to private setor 0 0 0 0 02.2.2.2. to Coatrest G _nNM 0 0 0 0 0'2.2.2.3. to raed 0 0 0 0 11

2.2.3. lr 18e I3 175 39 53

3. Crrant Mlince (1.l.- 2.1.) (61) 548 69 40 3S2

4. OptIng Balance (1. * 2.) | n Z 804 60? 3

5. lntest pont arres 0 0 0 0

6. Owelt bell e . -. ) 75 ? 7 60? 343!.............................................................................

7.1. Entenm 0 0 0 0 0'.2. oetc (U.S.A.) 240 1 0

P.91UW in curwmt t _C g (Bittion) 12.40 15,Os 16,67 10 t9,ts

B. Gyrlt Seluit /GO at official, Priesm.719 at pral 10 mimt pc9.1 te pwaLat rmu pr1.a 0.60 4.091 4.81 3.28 1.

9- "t transfrs (9.2 -9.t1 * 93) 4e9 I,M I'm 1.3179.1 Ttrmft toe the 11.6l.t 61 1G0 267 283282 9.2 *esifor frm tm U-o.e. 43 7571 3 " 76 19.3 Covera g ea Pretiq l tame 5 647 8S4 607 3S3

- 43 -

AuM 2.a

rSMTITUTIZONL HEPMCS AMM DKSMRIRTZ OF 75= SUDGET

A. Dudaet Formulations REWoution. and Contsol.

2.39 The budget process normally begins in April-May, with the issuing ofbudget guidelines by the Ministry of Finance, and ends in December, with theapproval of the budget by the People's Assembly. In June, the ministries andstate secretariats send their proposals for current expenditures and forinvestment projects to the National Budget Office. The provincial delegationsof the ministries send their spending proposals to the provincial delegations ofthe Ministry of Finance. After approval by the Provincial Commissar, theproposals are reviewed by the Popular Rssembly of the province and then sent tothe National Budget Office, which reviews and consolidates the individualproposals and formulates a draft budget. This budget is then approved by theMinistry of Finance, the Ministry of Planning, the Council of Ministers, and thePeople's Assembly.

2.40 The most important weakness of the budget process is that the budgetguidelines are not derived within an overall macroeconomic framework that makesthe domestic and external financing constraints explicit. In practice, foreign-financed expenditures are constrained, ex post, by resource availability.Domestic financing considerations, however, do not play a major role at thebudget proposal stage because public enterprises rely on central governmenttransfers and the government enjoys unlimited access to central bank financing.

2.41 Ex ante control of expenditures by the National Budget Office alsosuffers from several weaknesses. The Budget Office makes monthly transfers ofone-twelfth of each spending unit's budgeted allocation to an account in thecentral bank; spending managers then issue payment orders against this account.Spending managers must obtain justification from the National Budget Office toreceive anticipated monthly transfers or to recover transfers that were not spentin previous months. But they are required to report to the National BudgetOffice only when they make offsetting changes among the budgeted allocations.In addition, the budget includes a contingency reserve equivalent to 20 percentof expenditures, excluding wages and investment outlays, which can be used in thesecond half of the year after authorization has been granted by the Minister ofFinance - or by the Minister of Planning if the contingency reserve is to be usedfor subsidies of public enterprises or for investments. Furthermore, forseveral years, the budget has been significantly revised in the course of theyear to accommodate overruns in expenditures.

2.42 Ex post control of expenditures - except for investment expenditures,which are controlled by the Ministry of Planning - is the responsibility of theBudget Office and the provincial delegations of the Ministry of Finance. Controlis based on quarterly, mid-year, and annual reports prepared by the spendingmanagers and on daily and monthly reports prepared by the central bank. Thesereports are sent to the various offices of the Ministries of Finance andPlanning. In practice, the key role in budget execution is played by thedecentralized spending units. The heads of these units, the budget managers,have the power to shift funds among different expenditure allocations. Thispractice, together with the delays that occur in ex post reporting, often meansthat actual expenditures are very different from those authorized in the budget.

2.43 The highly decentralized system for budget formulation, execution, andcontrol is not well defined and not firmly implemented. Interactions between theMinistry of Finance (offices responsible for the formulation, execution, andcontrol of the budget), the Ministry of Planning, and the provincial andmunicipal authorities have, on occasion, been difficult. Coordination betweenthe central bank and the Ministry of Finance in the execution and control of thebudget is also not functioning well. The foreign exchange budget is currentlyprepared by the Ministry of Planning and the central bank, without major

- 44 -

participation by the Ministry of Finance. As a result, the state budget is notcoordinated with the foreign exchange budget. Thus, when expenditure overrunsoccur for budget items that have a foreign exchange component, the central banksimply finances them through special accounts.

3. Poyv2 ues3, ESPnMFetutges, ago LinancMi3

1. .Revenues

2.44 The bulk of tax revenues comes from the oil sector (Table 2.15). Oiltaxes, which are subject to contractual arrangements, have contributed an averageof about 50 percent of total revenues during the 1980.. The share of revenuesfrom nonoil sources has stagnated, mainly because of the de facto tax-exemptstatus of state enterprises, which constitute most of the nonoil sector; a fixedexchange rate that has remained unchanged, adversely affecting revenues frominternational trade; inefficient tax administration because of the large numberof taxes and small collections; and widespread tax exemptions and special regimesfor private and mixed enterprises.

2.45 Taxes on the Oil Comoanies. Oil companies operating in Angola aresubject to three major taxes: (1) a tax on the production of crude oil and gasat a rate of 20 percent for the Cabinda area and 16.67 percent for the rest ofthe country, (2) a 65.75 percent tax on net profits, and (3) a 70 percent tax ongross profits. Gross profits are defined as gross sales minus operating costs,amortization charges, and production and investment incentives.

2.46 There are two regimes for oil extraction. Under joint venturearrangements, which are the norm, SONANGOL and the foreign oil company share thecosts and profits from oil exploration and production and the taxes fall on thejoint venture. Under production-sharing arrangements, which have been negotiatedfor the exploration and development of the new oil fields, the foreign companyundertakes the investment at its own risk and recovers costs by keeping up to 50percent of oil output. Production is split between the company and SONANGOLaccording to a negotiated scale linked to oil production. The foreign companypays income taxes on its share of oil profits.

TABLE 2.15 ANGOLA: CNTRAL GOVERNNENT REVENUIS. 1987-89(billions of kwanzas)

1987 1987 1988 1988 1989Item budget actual rev. bud. actual budget

Total revenue 70.0 62.9 92.0 73.3 81.1

Tax revenue 41.4 46.8 54.1 45.1 61.0Taxes on oil companies 25.0 32.9 34.5 32.5 38.0Taxes on international trade 4.7 3.4 5.6 3.5 6.8Taxes on income/profits 3.7 4.4 5.2 3.4 9.2Taxes on goods and services 5.5 3.8 6.5 3.8 6.1Other taxes 2.5 2.3 2.3 1.9 0.9

Nontax revenue 28.6 16.1 37.9 28.2 20.1Transfers from national 1 8 17.public enterprises 13.5 8.0 17.08.6 4.8

Sources: National Tax Bureau: and National Budget Bureau.

2.47 Because oil production under sharing arrangements began only recentlyand because in the early years of operation high initial costs were beingrecovered, no significant tax revenues from oil-sharing arrangements are yetavailable to the government. Furthermore, under this type of arrangement, the

- 45 -

bulk of oil profits would go to SONANGOL, which is supposed to transfer part ofthem to the state budget.

2.48 Foreign oil companies are exempted from most other taxes, including theindustrial tax and customs duties, but they are subject to the stamp taxes. Thewages paid to employees of these companies and sales and profits of storesoperated by them are also tax exempt.

2.49 Transfers from Nonfinancial Public Einrteorises. The second major sourceof government revenue is transfers from nonfinancial public enterprises(excluding petroleum companies). At the same time, however, other enterprisesreceive large transfers to cover losses, price subsidies, and investment outlaysfrom the budget.

2.50 Taxes on International Trade. Trade taxes have the potential to providea much larger share of government revenue, but the effective average rate of taxhas shown a tendency to decline and is presently equivalent to a modest 10percent of imports. Revenues are adversely affected by a shrinking tax base dueto evasion, widespread exemptions, and collection problems. Taxes oninternational trade comprise an ad valorem tariff with rates up to 80 percent,a flat 9.0 percent service charge, small specific charges for a reduced numberof products, and several other charges representing very low yields.

2.51 Taxes on Income and Profits. This group includes the industrial taxlevied on business profits, a graduated tax on labor income, and a tax on incomefrom capital. The most important source of revenue in this group is theindustrial tax of 35 percent on the profits of companies with organizedaccounting. Until 1989, public enterprises were not liable for the industrialtax; in 1989, the tax was to be applied on average profits of the previous threeyears, and it was expected that profits would be fully taxable on a current basisin 1990.

2.52 Taxes on Goods and Services. The major taxes in this group are two stamptaxes levied on a variety of transactions, and a group of taxes on the productionand importation of various products. Because they are easy to enforce, stamptaxes are important revenue producers. Most of the revenues from the excisetaxes are collected by Customs at the time of clearance, and in the case oflocallv produced goods, the producers are required to report the sales of taxablegoods to the municipal finance delegations. Revenues from excise taxes are lowbecause of the large number of exemptions and collection problems at the Customsoffice.

2. Ex,enditures

2.53 Current expenditure grew rapidly in 1983-85 when oil revenues almostdoubled; they continued to rise in 1986-87 despite a slowdown in revenue growth(Table 2.16). Current expenditures grew by 9 percent in 1987-88 while revenuesincreased only 2.0 percent. The most inflexible components of currentexpenditures are security-related expenditures and the military, whose wages andsalaries are reflected in the budget while remaining expenditures are usuallytreated outside the budget.

2.54 Wages and salaries account for about half of total expenditure. Becauseof limited information on civilian employment and the confidential nature of thedefense wage bill, it is not possible to analyze the results of efforts initiatedin 1986 to reduce the high cost of government employment. The salary scale isuniform for all ministries, and the number of employees cannot be increasedwithout the consent of the Ministry of Finance. A general salary increase wasgranted in 1986, followed by a job evaluation plan whose impact on the budget isexpected to be spread over several years.

2.55 Money wages are not very relevant. More important is the fraction ofnominal wages allotted to entitlements to purchase consumer goods at officialprices (see Chapter 3). All employees are entitled to purchasing rights

- 46 -

TABLE 2.16 ANGOLA: CENTRAL GOVERNMENT EXPENDITURES. 1987-89(billions of kwanzas)

1987 1987 1988 1988 1989Item budget actual rev. bud. actual budget

Total expenditure 77.4 87.4 105.9 95.6 109.2

Current expenditures 72.2 76.4 84.0 19.2 89.1

Wages and salaries 40.7 47.5 44.5 47.4 43.5

Goods and services 21.2 19.7 18.4 24.4 30.2

Subsidies and transfers 10.3 9.2 21.1 7.4 15.4

Capital expenditures 5.2 11.0 21.9 16.4 20.1

Capital assets 3.6

Transfers 7.4

Sources: National Tax Bureau and National Budget Bureau.

expressed in physical units of certain basic consumer goods. However, becausethe supply of these goods is so scarce, this entitlement has a low economic valuefor mid- and upper-level employees. More recently, a second purchasing rightdefined in kwanzas has been introduced. It consists of a graduated scale rangingfrom Kz 5,000 to Kz 20,000 per month, representing about one-third of the salary.This entitlement provides a measure of stable real purchasing power as long asofficial prices do not change. If certain goods are in short supply, employeescan purchase other goods at official prices and sell them at free market prices.Goods and services include some staff-related expenses such as travel, training,food, and medical services expenditures as well as fuel, repairs, and supplies.

2.56 Subsidies and transfers consist of payments to public enterprises tocover operating losses, to add to their working capital, and to close the gapbetween the selling price and the cost of producing certain merit goods, such asmilk. Price subsidies grew rapidly until 1986, with agricultural enterprisesreceiving the bulk of such transfers. In 1986, the principle of self-financingwas introduced, and enterprises were allowed more flexibility in setting prices.As a result, budget allocations for 1989 include a reduced amount for nominalsubsidies.

2.57 Capital expenditures comprise investment projects under the directresponsibility of the central government, which are normally insignificant, andinvestment expenditures of public enterprises. Budget allocations for investmentand actual investment outlays differ markedly because of the lack of coordinationbetween the state budget and the foreign exchange allocation budget controlledby the central bank which, in fact, sets the foreign financing available. Until1986, public enterprises, with the exception of SONANGOL and ENDIAMA, wererequired to transfer almost all of their profits and depreciation allowances tothe government budget and had to rely on government capital transfers to financetheir investment plans. Although public enterprises may now keep most of theirprofits and all of their depreciation allowances and thus may be better able tocarry out their investment plans, the stringent constraints on foreign resourceshas kept investment outlays to a low, and many public enterprises haveaccumulated large immobilized deposits in the central bank.

3. Financina

2.58 The central government budget has consistently recorded large overalldeficits since 1978 even when revenues rose rapidly, as in 1981 and 1984.

- 47 -

Furthermore, total revenues seldom covered current expenditures, and the gap haswidened in recent years (Table 2.17).

2.59 Although in some years the budget included interest payments on foreigndebt, only in 1986 were such payments actually made by the Ministry of Finance.The budget does not include provisions for amortization of external debt.External debt servicing is the responsibility of the central bank, but until nowrecords of debt servicing did not distinguish among the debt obligations of thecentral government, public enterprises, and the central bank.

2.60 Domestic financing of the state deficit in Table 2.17 refers entirelyto central bank financing. A plan partially to finance the 1989 deficit bytapping private sector savings through a bond placement was not implementedbecause of the potentially very high cost to the budget associated with theforeign exchange guarantee attached to the amortization payments. Central banknet credit flows to the central government have consistently been much largerthan the overall deficit recorded by the Ministry of Finance since 1984, thefirst year for which monetary data are available. Although central bank netcredit to the government may include as ceutstanding some obligations that werealready paid off in the past, the discrepancy in the flows seems to have widenedin 1987-88. Central bank staff have been revising the monetary and creditaccounts in an effort to account for such large differences.

C. Zzt_abud_eta!X Operations

2.61 The government budget does not include all central government operations.There seem to be four major areas of expenditures that are not included in thatbudget: foreign debt service, domestic debt service, some expenditures financedwith foreign grants or loans, and some military expenditures. There is noinformation on the size of extrabudgetary defense-related expenses and nosystematic records of expenditures financed with foreign funds.

2.62 Central government domestic net debt or central bank net credit to thebudget had totaled about Kz 250 billion at the end of 1988. The government doesnot pay interest on this debt nor does it make amortization payments. Interestrates on time deposits are presently set at 8.0 percent, but Banco Popularofficials believe that a rate of about 15 percent is needed as an incentive toincrease savings. However, since the government debt to the central bankincludes outstanding balances from a long time back, when interest rates may havebeen very low, current interest rates are probably not relevant for allgovernment debt.

2.63 The difference between government financing reported by the central bankand the deficit reported by the Ministry of rinance provides an estimate of thesize of government expenditures not accounted for in the budget. For 1989, thisdifference is estimated by the central bank as Kz 16 billion. Adding theinterest due on the external debt (Kz 3.4 billion) brings the adjusted governmentdeficit up to Kz 47.5 billion, from Kz 28.1 billion.

TABLE 2.17 ANGOLA: CENTRAL GOVERNMENT DEFICITS AND FINANCING. 1987-89(billions of kwanzas)

1987 1987 1988 1988 1989Item budget actual rev. bud. actual budget

Total revenue 70.0 62.9 92.0 73.3 91.1Total expenditure 77.4 87.4 105.9 95.6 109.2Overall deficit -7.4 -24.5 -13.9 -22.3 -28.1Domestic financing (net) 41.0 53.7External financing n.a. n.a.

Sources: National Tax Bureau, National Budget Bureau, and National Bank of Angola.

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AJII 2.8

An "&DMT" MEDO= AmD TIM EXCNGS RAmU

2.64 The budget deficit can be adjusted by taking into account the existenceof strong kwanzas (with some purchasing rights at official prices) and weakkwanzas (with no purchasing rights), and can then be expressed in terms of GDP.If operations in weak kwanzas are a small proportion of the total, the budgetdeficit relative to GDP is likely to change very little in response to changesin the exchange rate used for conversions.

(S.1) D - J -B,

where D is the deficit, J is government revenues, and E is governmentexpenditures.

(8.2) De - J- Ee

and

(B.3) De - (Jl+nJ2) - (E81 nE2),

where an asterisk indicates an "adjusted" figure, J is government revenues inweak kwanzas, J2 is government revenues in strong iwanzas, n is a conversionfactor (the number of weak kwanzas that make a strong one) equal to P/P 0 , wherePp is the parallel market price and PO is the official market price. Then

(8.4) D* (Jl-E 1 ) - [n(J2-Z2)](8.4) =~~~DP G DP'us ER 0

where GDP*5 is GDP in U.S. dollars and ER is the exchange rate and isapproximately equal to P.. Then

(B.5) D- . J 1 - E1 _ J2 - E2GDP GDP*us Pp GDPUS P0

If (J.-E 1 ) is close to zero, then (D*/GDP*) will not be affected by changes inER. In these estimates, the assumption that GDP is constant in U.S. dollars isa strong one. It can perhaps be defended in the case of Angola because of thehigh proportion of tradables (oil and diamonds) in GDP.

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ANE 2.C

oovxvma UD MD= -inXYRNL am, s

2.18 ANGOLA: DCLLAR COMPONEN OF THE GOVERNMENT BUDGET. 1989(percent and USS)

1989 Dollar component of budgetOfficial USS

Item budget (Kz) Percent billion

Total revenue 81.1 46.9 1.266

Tax revenue 61.0 62.3 1.2667

Taxes on oil production 38.0 100.0 1.2667Petroleum output 11.0 100.0 0.3667Profits of companies 14.0 100.0 0.4667Other&/ 13.0 100.0 0.4333

Taxes on internLtional trade 6.8 0.0 0.0000Customs duties 5.0 0.0 0.0000Customs fees 1.6 0.0 0.0000Tonnage tax 0.0 0.0 0.0000Lighthouse tax 0.0 0.0 0.0000Export duties 0.2 0.0 0.0000

Taxes on incomes 9.2 0.0 0.0000Industrial tax 5.5 0.0 0.0000Labor income 3.3 0.0 0.0000Capital income 0.4 0.0 0.0000

Taxes on goods 7.0 0.0 0.0000Stamp duties 3.5 0.0 0.0000Petroleum production 1.0 0.0 0.0000Beer 1.6 0.0 0.0000Other 0.9 0.0 0.0000

Nontax revenue 8.3 1.0 0.0000Transfers from nonfinancialpublic enterprises 4.8 0.0 0.0000

Property income 2.5 0.0 0.0000Transfers from mixedpublic enterprises 0.5 0.0 0.0000

Other revenue 11.8 0.0 0.0000

Total expenditure includingextrabudgetary expenditures 128.6 41.6 1.7837

Total expenditure excludingextrabudgetary expenditures 109,2 31.2 1.1371

Current expenditure 89.1 29.2 0.8691

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2.18 A-NGOLA: DOLLAR C0MPONENT OF THB GOVERNMENT BUDGET. 1989(percent and USS)

1989 Dollar component of budgetOfficial US$

Item budget -(Xz) Percent billion

Personnel 53.5 36.6 0.6527Salaries 43.5 35.0 0.5075Other compensation 4.5 35.0 0.0525Travel 4.2 60.0 0.0840Training 1.3 20.0 0.0087

Goods 8.4 17.6 0.0493Fuel 2.9 0.0 0.0000Repairs 2.7 10.0 0.0090Medical supplies 0.8 100.0 0.0267Durable goods 0.7 40.0 0.0093Other 1.3 10.0 0.0043

Services 6.8 58.1 0.1317Food 4.4 80.0 0.1173Linen, clothing 0.8 0.0 0.0000

Medical services 0.3 100.0 0.0100other services 1.3 10.0 0.0043

OtherForeign cooperatives 1.2 60.0 0.0240Scientific research 0.1 100.0 0.0033Representation 0.0 100.0 0.0012Conferences, etc. 0.4 10.0 0.0013other 3.3 5.0 0.0055

Transfers 15.4 0.0 0.0000Pension benefits 0.2 0.0 0.0000Losses of state enterprises 0.0Price subsidies 0.0other subsidies 15.2 0.0 0.0000

Capital expenditure 20.1 40.0 0.2680Interest on external debt 3.4 100.0 0.1133Other extrabudgetaryexpenditures 16.0 100.0 0.5333

Deficit includingextrabudgetary expenditures -47.5 -0.5171

Deficit excludingextrabudgetary expenditures -28.1 0.1296

a. Excludes profits tax of enterprises operating under special regimes.

Source: Ministry of Finance; and mission estimates.

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Al=X 2.D

THU NISTITU!IONAL U&LA&TONS B3TWY3N TEe CNRAL GOVIRNm!N1AiD Tim PUBIXC 33!SRPRXSUA

2.65 Angola's public enterprises have been working within strictly definedbounds since 1977. After an initial period (1976-77) during which ownership andoperational responsibility were assigned to worker collectives, the 1977 reformcreated state enterprises, but transfers of property were implemented slowly.The government tried, unsuccessfully, to implement a system of central planningin which each enterprise depended on a technical (or sectoral) ministry, whichdetermined its production level and selling prices in accordance with sectoraland national objectives. In addition, the Ministry of Planning (in associationwith the central bank) and other ministries (Finance, Trade, and Energy-Petroleum) played an important role through the allocation of foreign exchange,which ultimately determined the level of investment and the availability ofimported inputs. The system worked poorly, mainly because of the lack of skilledpersonnel and fluctuations in the country's foreign exchange income, whichresulted in a lack of consistency between a firm's authorized foreign exchangeallocation and its available share of hard currency at the central bank.

2.66 Managers are given little latitude in hiring or firing workers.Furthermore, nominal wages and worker qualifications are set by the labor codes.Consequently, there are few incentives to improve performance or to keep accurateaccounts of the enterprise's economic performance. In addition, pricedistortions make it impossible to assess performance accurately: the overvaluedkwanza distorts any economic decision that involves an external transaction(imports or exports), and fixed official prices provide a strong incentive todivert inputs and production to parallel markets. It is reported that someenterprises operate in parallel markets either openly or indirectly, through theresale of the so-called workers' "autoconsumPtion".46/

2.67 Until 1988-89, financial relations between parastatals and the generalgovernment budget were strictly regulated. Operating surpluses were divided intofour shares: out of the overall operating surplus, the budget received 50percent, but the government also covered all operating losses of otherparastatals; 5 percent was allocated to a social fund; an investment fundreceived 30 percent, but the government financed all needed investments; and,finally, the remaining share was for enterprise use. Starting in 1988, somereforms were introduced to increase enterprise autonomy - enterprises were tofinance their own investments and to have greater freedom in deciding theirpricing policies - but the extent to which they have been implemented is stillunclear. In addition, their contribution to the investment fund was apparentlydropped, but the government was still supposed to cover their operating losses.An SEF Memorandum (No. 87) provided some guidance on how to implement thesereforms, which also included some steps toward privatization: the 17 largestparastatals were asked to provide a detailed analysis of their economicperformance (including an analysis of their labor force situation, an assessmentof their net indebtedness, a complete report on their past accounts between 1986and 1989, and a forecast of their expected performance for 1990).

46/ Wages are sometimes paid in kind: workers receive a certain amount of the firm's production aspart of their remuneration. In some cases, this can be substantial (beer and cigarette factories,for example).

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AIMIX 2.Z

METRODOLOGICAL ISSUIS IGMAMDZNG THE COKSOLIDAT3D PAMASTATAL ACCOUNYS

2.68 For a given parastatal, revenues and expenditures were broken downbetween current and convertible kwanzas (signaled by a U.S. dollar term).However, the convertible kwanza figures presented in the tables are denominatedin kwanzas, not in U.S. dollars. This breakdown was based on the availableinformation on revenues and expenditures that are received or paid in convertiblecurrency (mainly U.S. dollars). When this information was not explLcit, we usedassumptions consistent with what we knew about similar items in otherenterprises.

2.69 For example, sales revenues are generally received wholly in currentkwanzas, with the exception of exported commodities or services (crude oil,diamonds, some international phone calls, some international airline tickets).Current transfers from the general government budget are in current kwanzas, withthe exception of foreign exchange allowances (however, those appear directly inthe expenditure items, mainly through inputs and investments). Personnelexpenditures are only partly incurred in current kwanzas. Technical assistanceand part of the salaries are paid in convertible kwanzas. Finally, amortizationand all capital-related expenditures are in convertible kwanzas.

2.70 The accounts in current kwanzas are meaningless. Virtually all publicenterprises have a balanced budget in current kwanzas. Some interesting resultsappear when the accounts are broken down into convertible and current kwanzas.The manufacturing sector does not appear to be a heavy user of foreign exchange;all sectors but oil and diamonds have unbalanced budgets in convertible kwanzas;and the transport sector is the heavy user of foreign exchange. Moreover, inconsidering net transfers to the government budget, it is important to realizethat only SONANGOL and ENDIAMA are transferring net foreign exchange to thebudget.

CHUPTR 3

RWOi4ETIZ&TXON OW 0 NCOMeS IN THE FOMNLL SECTOR

3.1 This chapter provides a quantitative description of Angola's formalsector and its system of remuneration (Section I), examines the theoretical andquantitative implications of a comprehensive remonetization of wages in theformal sector (Section II), and formulates some tentative policy recommendationson the scope and sequencing of the wage remonetization (Section III).

3.2 Formal sector wages in Angola have three components: a direct nominalpayment, entitlements to purchase goods at artificially low prices (entitlementsmay be resold at much higher market prices), and various fringe benefits. Asdiscussed in this chapter, wage remonetization means replacing existingentitlements with a higher money wage. The monetization of fringe benefits isnot explicitly considered, partly because they are common in almost all wageeconomies and partly because their value to workers is hard to assess, giventheir limited transferability. We do include some observations on the role offringe benefits, however.

3.3 The two main conclusions of this chapter are that (1) the remonetizationof wages is highly desirable and feasible and would not necessarily increase theconsolidated public sector fiscal deficit and that (2) remonetization should beaccompanied by price liberalization (gradual or immediate). The analysisemphasizes a gradual two-step approach to remonetization and priceliberalization, although an immediate, one-step implementation is an option.

3.4 Remonetization is desirable because it will considerably reducetransaction costs and establish the basis for the formulation of a wage policy.Remonetization is feasible because it can be considered merely as a change in theeconomy's numeraire and will not worsen the fiscal deficit if it is synchronizedwith price liberalization.46/

3.5 A preference for a gradual remonetization could be argued based on thelikelihood that prices will not be liberalized at once. Moreover, it isrecognized that the government's administrative capability is very weak and thatthere is uncertainty regarding the current level of workers' purchasing power -although some estimates are provided in Sections II and III. During the firststage of the remonetization, the government could test its capability toimplement price increases of domestically and imported consumer goods, combinedwith the payment of correspondingly higher wages. The remonetization could beachieved by continuing these partial adjustments in prices and wages untilofficial and parallel prices were unified, thus reversing the process that ledto the emergence of nonmonetary wages. An alternative approach would be toimplement a gradual, top-down remonetization that begins with remonetization ofthe incomes of managers and technicians. This approach would require a pricehike to offset the cost increase to the government and the parastatals caused bythis partial remonetization (only the 17 or so items of the basic entitlementwould be excluded from the first stage).

3.6 The remonetization can, obviously, also be interpreted as a stabilizationinstrument in Angola' a prospective economic reform program. Given the country' ahigh level of domestic absorption - especially on consumption - a cut in realwages might be necessary under a stabilization program and could be implemented

46/ This assumption is crucial: remonetization is fiscally neutral and has no impact on the physicalallocation of goods in the economy if, and only if, relative prices - and therefore levels of demandand supply - stay the same. This condition can hold when workers are given a monetary wage inkwanzas that maintains their purchasing power under the current system. Were demand to be differentbecause of say, an overshooting of the wages' purchasing power or a substantial modification inrelative prices, then fiscal neutrality would not hold.

- 54 -

at the sam time as remonetization. The calculations included in this chapter,however, are based on the assumption of maintaining the purchasing power ofworkers.

3.7 Two features of the Angolan economy are important to the analysis ofremonetization. First, consumption patterns are guided by prices that aredetermined in parallel marketa. Foreign exchange - and therefore imports - arerationed administratively. Supplies of imported intermediate and capital goodsare strictly limited. Domestic production meets only a small proportion of thedemand for consumer goods, and the balance is met by imports. Unlike the casein many other administratively controlled economies, shortages of consumer goodsdo not seem to be as widespread in Angola,4 7/ since prices adjust to equatesupply and demand in almost freely functioning parallel markets. Second,producers operate simultaneously in official and parallel markets. Althoughconsumer prices are more or less market determined, the same cannot be said forproducer prices. Strictly controlled prices for some goods coexist with pricesclose to market levels (less trading margins) for others. Prices received byparastatal manufacturing enterprises are only a small fraction of the prices paidfor the same commodities on the parallel market. To make matters even morecomplicated, some industrial producers are believed to divert part of theiroutput to the parallel market and to sell the remainder at official prices.

x. LABOR F'ORCE MN TM rOUI SECTOR IN AUGOL&

3.8 This section describes Angola's labor force, focusing on its formalsector component. It explains in detail the system of remuneration in the formalsector and discusses its economic consequences.

A. The Foxal SBeatr Labor Forc

3.9 In the late 19809, Angola's population totaled about 10 million (Table3.1). Its annual population growth rate of about 2.7 percent is below theaverage (3.2 percent) for Sub-Saharan Africa as a whole. The urban populationhas been growing at an annual rate of about 7.5 percent and constitutes about 37percent of the total population. The civil war and the income differentialbetween rural and urban areas help to explain these trends.

3.10 Angola's labor force is estimated at about 4 million people in 1988-89,based on a participation rate (ratio of economically active population to totalpopulation) in 1988-89 of slightly above 40 percent - or 80 percent of thepopulation aged 15 to 64. This labor force estimate is based on theInternational Labor Office's481 estimate of the participation rate, which isconsiderably higher than previous estimates of about 24 percent (for 1985).49/These estimates imply that the economically active population is growing slowerthan total population.

3.11 Formal sector employment in Angola totaled about 839,000 workers in 1988,or about 21 percent of the economically active population; informal sectoractivities accounted for about 3,011,000 workers. About 82,000 workers were

47/ The relaxation of the foreign exchange constraint on imported consumer goods - through a quasi-OGL window - constitutes a way of circumventing political unrest in urban areas, which are the sourceof much of the government's traditional political support.

4B1 The labor force data presented in this section and in Table 3.1 are based largely on two non-Angolan sources, the International Labor Office (1LO) and the International Institute for StrategicStudies. Field data were also used. In some cases the data were corrected because of a lack ofconsistency between the various sources. We relied on the ILO's estimate of the participation ratebecause it was more in line with average participation rates of other African countries.

4§- The UNDP/World Bank Introductory Economic Review on Angola, for example, assumed a participationrate of only 24 percent in 1985. based on estimates made by Angola's Instituto Nacional deEstatistica.

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TABLE 3.1 AOL_: TOTAL POPULATION AND CONCLCIVE PPULATNIN THE FORMAL AND INFORMAL SECTORS. SELECTED YEARS, 1980-90

(thousands)

Item 190 1985 1987 1988 1989 1990

Pepulatiorf 1

Growth rate (8) 3.4 2.5 2.7 2.7 2.7 2.7_mbr 7,722 8,754 9,232 9,481 9,737 10,002

males" 3,794 4,306 4,544 4,668 4,195 4,926Vesmlesi 3,928 4,448 4,689 4,815 4,944 5,076Age O to 9b 2,509 2,849 3,008 3,090 3,175 3,262Age 10 to 14 bJ 902 1,055 1,119 1,153 1,187 1,223Age 15 to 64b) 4,082 4,586 4,827 4,953 5,081 5,213Age 65 and oldeEW 229 264 279 287 296 304rrbm 0 1,781 2,579 2982 3206 3447 3,706

Growth rate 4%) 8.54 8.13 7.S2 7.52 7.52Percpnt of total population 23.06 29.46 32.30 33.81 35.40 37.05

Rural 5,941 6,180 6,251 6,275 6,290 6,296Growth rate (t) 2.16 0.61 0.54 0.39 0.23 0.10Percent of total population 76.94 70.S9 67.70 46.19 64.60 62.9s

Rconcsieally activeaf 3,414 3,719 3,860 3,932 4,006 4,081Percent of total population 44.21 42.48 41.81 41.47 41.14 40.80Percent of population 15-640 83.64 81.09 79.96 79.39 7S.83 78.28Foul 0ecto*W 888 851 839 827 815

Percent of total population 10.14 9.22 8.85 8.49 8.15Percent of economically active population"w 23.87 22.05 21.34 20.65 19.98Percent of urban population 34.43 28.55 26.17 23.99 22.00Civilian' 675 639 627 615 603

Percent of economically active population"' 18.16 16.55 15.93 lSy.34 14.77military" 213 213 213 213 213

Gov"tnMent 148 148 148 148 148Other 65 65 65 65 65Percent of e9onauically active populationl1 S.71 5.51 5.40 5.30 5.21

informal seotor' 2,760 2,930 3,011 3,092 3,175Petrent of total population 31.53 31.74 31.75 31.76 31.74Percent oJf economically active populatiorp/ 74.21 75.91 76.57 77.19 77.79

Uneoployad 71 78 82 87 91Percent of total populatlon 0.61 0.85 0.87 0.89 0.91Percent of economically actv population" t 1. 91 202.02.16 2.23

a. International Labor Office to 1986; population after 1986 is projected using average growth rate for 1981-86. AnotherPossible source is the UN couniasion for Africa, Statistieal rearbook 1985 (mid-year population).b.nterrnational Labot OffiCe: available data are for 1970, 1980, 1985, and 1990. other years are obtained by linearInterpolation.c. Sreakdown after 1986 Is projected using average growth rate for each category for 1984-86s 1981, 1983, and 1985 breakdownsare obtained through linear Interpolation.d. Formal sector total Is calculated by adding estimates for fotmal sector civilian and military personnela. alnistry of Planning: the only available figure to for 1986: figures for other years are ottained by extrapolation(corrected by a coefficient (UNTA dota/Plan data)f. International Institute for strategic Studea (Military Balanc I9S--89) fgutre Is for 1988 and includes UWITA's aemdforces.g- Informal sector total is calculated by subtracting the number of urwployed from total formal sector employtnnt and thensubtracting that amount from the total economcally active population.h. Only available data are for 1985; a slightly Increasing percentage of the eeomically active population Is applied forother years.

registered as unemployed. Of formal sector workers, about 212,500 were militarypersonnel (including UNITA forces), or more than 5 percent of the labor force,a very high figure for Sub-Saharan Africa. Among the 626,500 formal sectorcivilian employees, 250,000 worked for the central government and 376,000 forparastatals or the private sector.

3.12 A sectoral breakdown of the labor force for 1988 shows that agricultureaccounted for the largest share at about 70 percent (Figure 3.1). Mostagricultural workers are employed in informal sector activities. The formalagricultural sector (mainly state-owned enterprises) employs only about 2 percentof the labor force. Compared with other Sub-Saharan African countries (Table3.2), Angola has a low proportion of workers in agriculture and a high proportionof military personnel (more than 5 percent).

3.13 The only available breakdown of the labor force by occupation is for the626,500 civilian formal sector workers (Figure 3.2 and Table 3.3). Little isknown about the qualifications required for each of the categories shown inFigure 3.2. Technicians and managers are generally reported to have a universitydegree, but this is not always the case.

3.14 A final striki.j -.aracteristic of the formal sector in Angola is that theemployment level is not determined by economic criteria. Although production in

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the manufacturing sector 3.1 angola: Seotoa Dreabdown of th tabor Lorce, 1988dropped by more than 80percent between 1975 and1988, employment in thesector remained about the 4

same.

S. The -- 0-uuration 8st l

3.15 Since parallelmarkets emerged in the1980s, the purchasing powerof workers' income has beenvoluntarily protected by ,,,,., t..,

what is effectively an in-kind indexation system. Anadministratively determinednominal wage has remained \t. hI.4e IWlOloosely linked to fixedofficial price levels,while the large losses inpurchasing power - measuredby shortages in officialshops or by parallel marketprices - were redressed through various buying-rights schemes (entitlements) andpayments in kind (see Chapter 1). Because of the large premium in the parallelmarket and the scarcity of products in official shops, workers have been

TABLE 3.2 AN60LA: SBCTORAL BREAKDOWN OF THE LABOR FORCEIN ANGOLA, MOZAMBIQU. AND CENTRAL AFRICA

(thousands)

Anqola Mozambique Central Africaa(1988 1980 1980

Sector Formal Informal Total Percent Total Percent Total Percent

Agriculture 83 2,649 2,733 69.49 5,832 83.56 15,649 71.49

Industry 214 40 254 6.46 509 7.29 2,276 10.40

Services 329 322 651 16.55 562 8.05 3,719 16.99

Military 213 0 213 5.40 76 1.09 247 1.13

Unemployed 82 0 82 2.10 na 0.00 na 0.00

Ecoromicallyactivepopulation 921 3,011 3,932 100.00 6,979 100.00 21,891 100.00

a. Central Africa includes Angola, Cameroon, Central African Republic, Chad, Congo,Equatorial Guinea, Gabon, and Zaire.

Source: World Bank staff estimates based on the following sources of information:For Angola, staff estimates; for Mozambique and Central Africa, 1980 data fromInternational Labor Office; for military personnel for all countries, the source isThe Mllitary Balance 1988-89 (International Institute of Strategic Studies, London).

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TABLE 3.3 ANGOLA: BREZUKDONN OF THE FORMAL SECTORLABI R FORCE BY OCCUPATIONAL CATEGORY. 1988-89

Number of workers Percentage

Parastatal ParastatalCentral and Central and

government private Total government private Total

Manaqers 14,624 14,624 29,249 3.68 3.89 3.78

Technicians 27,730 41,595 69,326 6.97 11.05 8.96

Clerks 150,217 37,554 187,771 37.X8 9.98 24.26

Workers 57,565 282,589 340,154 14.48 75.08 43.95

Total civilians 250,137 376,363 626,500 62.91 100.0 80.94

Military,government 147,500 0 147,500 37.09 0.00 19.06

Total government 397,637 376,363 774,000 100.00 100.00 100.00

Military, other 65,000 0 65,000

Total 462,637 376,363 839,000

Source: World Bank Staff estimates based on the following information: Total numberof workers in the formal sector given by the Ministry of Planring (Labor Force Unit);military personnel (government and other - UNITA forces) is provided by theInternational Institute for Strategic Studies, London.

reselling nearly all of their payments in kind or their entitlements in parallelmarkets.

3.16 Including theft, there are nine basic components to worker income in'Angola:

• The nominal wage wiL 3.2 anpola: ouawtional Brueakw In the oz.al Seoto:,which constitutes 19_8only a minor partof total remunera-tion. For manyworkers, nominal I... (a*m,.' . 5aate2 e-..wages have remained T 0..t11 1l te. unchanged since1981.

e "Autoconsumption"is a monthly enti-tlement to buy \ tn..goods produced bythe employer at of-ficial prices.This entitlement isloosely tied toworker performance(a worker who takesmore than two sick-leave days a monthloses this entitle- * 140.1

ment)..

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e The basic entitlement (cartao basico), a quantity-based entitlementavailable to all salaried and self-employed workers, entitles workersto a fixed basket of 15 to 16 basic commodities at official prices.These basic commodities, which are often in scarce supply, can be col-lected only in official government shops. The shop delivers the totalamount of the monthly entitlement for each commodity on a once-and-for-all basis. To receive the commodities, workers must display their basiccard (cartao basico), which is issued by the Ministry of Internal Trade.

* The fish and meat entitlement (cartao de talho) allows workers to obtainthese commodities at official prices in return for a monthly deposit.The procedure is similar to that of the basic entitlement. Fish isusually available only at free market prices in parallel markets, andmeat deliveries have recently been limited to frozen chicken.

* The complementary entitlement (cartao complementar) allows workers - whomust first make a monthly deposit - to select commodities at officialprices in a special shop up to the value of their deposit. Access istheoretically limited to low- and mid-level technicians, althoughhigher-level employees also seem to have access in many cases. Themaximum allowable deposit varies from Kz 2,150 to Kz 3,950 a month.Workers may, however, skip the payment in a given month and double upthe next month. A maximum of 12 deposits may be made each year. Beforemaking any purchases, workers must display their complementary card(caztao complementar) to demonstrate that they have made the necessarydeposit.

* The special entitlement (cartao especial) is similar to thecomplementary entitlement except that it applies only to high-levelemployees in the public sector (government and parastatal employees) andin the oil sector. The maximum allowable deposit varies from Kz 2,300in government service to Kz 20,000 in some parastatals. Both the rangeand availability of goods are generally greater than under thecomplementary entitlement. Workers must display their special card(cartao especial) to enter the special shops. Foreign companiesoperating in Angola, the national oil company (SONaNGOL), and theAngolan Armed Forces have similar special shops for high-levelofficials.

a The requisition (requisicao) allows workers to obtain additional goodsat official prices from other establishments. This is not thought tobe a very significant part of income for most workers.

* Fringe benefits range from a gasoline allowance of Kz 3,500 a month atofficial prices and a free car for higher-level public sector employeesto a US$500 foreign exchange allocation available to all workers everythree years. Workers receive a modest payment of Kz 300 a month foreach child, and free medical care and education are provided by thestate. Free meals are also commonly provided for lower-level workers.A Christmas bonus in kind is commonly given to workers in mostenterprises. Little is known about similar benefits available toexecutives in the private sector or in some parastatals, but they arebelieved to be substantial.

* Losses and thefts are reported to be large (20-30 percent) in firmsproducing or distributing marketable commodities and at the Port ofLuanda. 50 Exactly how much of these losses can be attributed topilfering by workers and how much to diversion by employers to theparallel market is unknown. Most of these wholesale transactions are

50/ Theft is reported to reach as high as 50 percent of production in PESCANGOLA, the state-ownedfishing company.

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reported to take place in a special "wholesale" parallel market (theCalaboca market) on the periphery of Luanda.

3.17 A breakdown of employee remuneration by these constituent componentsreveals a strikingdistribution: calculated Flgar. 3.3 agla: coq_emte of ZOVg'..e Imaera 1965-89at parallel market prices,nominal money wagesrepresent less than 5percent pf an averagre t o tUStto*W &,,,,,worker' ls total incomewhile the basic entitlement .,r$ / / accounts for about 40percent (Figure 3.3).

3.18 Remuneration ofworkers is governed bylabor laws (Lei General doTrabalho) and by specific _ w. go.-

decrees that stipulateremuneration levels and " ". /define occupationalcategories. Salaries arefixed within eachoccupational category. TheSEF program and Decree No.44/89 (August 5, 1989)introduced some flexibilityfor wages by definingminimum wages for eachcategory and allowing employers to adjust wages within certain limits. Thisdecree is being revised, however. Other legislation, issued by the Council ofMinisters, calls for reclassification of workers into updated occupationalcategories. The objective is to establish qualifications for each position inthe public sector. A census of the civil service is being carried out to helpimplement this reclassification, but only a small fraction of civil servants hasbeen reclassified so far.

3.19 Less is known about the administration of the nonmonetary components ofworkers' incomes. The Ministry of Internal Trade administers the network ofofficial shops that deliver basic goods through the basic entitlement and thefish and meat entitlement schemes, but not much is known about how the system ismanaged. The ministry is reported to have a computerized file of allbeneficiaries of the basic and complementary entitlement and some participantsin the special entitlement scheme. Some of the special entitlements are managedby employers, as are the duty-free and special shops of individual firms.

C. xEonomic consequenesg of the VeaeNt System

3.20 This system of remuneration has two major economic flaws: it entails,extremely high transaction costs, and it lacks transparency. Since the monetarycomponent of incomes represents only about 5 percent of the total, workers -including higher-level civil servants - have to complement their monetary incomeby trading in the parallel market using the various commodities they purchasethrough their entitlements. There are several levels of parallel markets thatchannel the goods from the official or special shops - where goods are bought atofficial prices through the various entitlements - to final consumers. Workersare reported to devote a substantial proportion of their working hours toparallel market activities.

51/ The average worker's income Ls a combination of incomes for all occupational categories weightedby their shares in total employment.

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3.21 This system of remuneration is also characterized by a total lack oftransparency since relative shortages between the various official shops ratherthan incomes policies determine real income distribution. The result appears tobe quite regressive. Special duty-free shops that are restricted to higher-levelofficials are known to suffer little from shortages. The availability ofsupplies in other official shops often depends on the type of customer theysupply: higher-level government officials usually have access to all the goodsin their basic entitlement; others may face severe shortages. In addition, theeffective differentials between occupational categories may be much higher thanour estimates indicate.

II. RNMWOETISZNG IRCObbU

3.22 This section details the economic advantages of remonetizing incomes inthe formal sector and presents some estimates on remonetization. Thesecalculations constitute a first estimate of the impact of the remonetization onpublic finances. (Annex 3.A provides an accounting framework for Angolaformalizing the main findings of this section.) This work on the remonetizationof incomes has two distinct aspects. One is the creation of an analyticalframework for determining the current purchasing power of workers' income.Purchasing power is broken down into its various components, which are associatedwith the crucial policy measure required to implement remonetization: priceliberalization. The second concerns macroeconomic impacts, since the remonetizedwages will determine the level of real wages through correction of the nominalwage. The level of real wages is one of the variables that influences domesticdemand and so has to be defined in the context of economic stabilization.Stabilization-related issues are not addressed in this chapter, however.

A. The Sconomic Advantaaes of Remonetization

3.23 The remonetization of incomes will reduce transaction costs for theeconomy, broaden the income tax base, and allow the government to formulaterational wage policies. Many of the transactions required under the presentsystem - shopping around for the highest selling price and the lowest buyingprice - will be eliminated with .amonetization. And the greater the number ofintermediate transactions between the initial sale by the worker and the finalpurchase in the parallel market - and this number seems to be substantial inAngola - the greater the savings in transaction costs that will result fromremonetization.

3.24 Remonetization will also broaden the income tax base and simplify taxadministration. At present, it is very difficult to apply sales taxes in theparallel market. Remonetization would necessarily require the full integrationof parallel markets into the retail system, thereby broadening the potential taxbase. Similarly, the only effective way of taxing workers' incomes under thepresent system is to raise official prices (since workers' entitlements aredenominated in official prices), a politically unpopular move. Under aremonetized system, it should be possible gradually to introduce an income taxon consolidated wages.

3.25 The complexity of the present wage system makes it difficult to determineactual levels of total remuneration. That in turn makes it difficult for thegovernment to devise and implement a coherent wage policy in the public sector.Remonetization would facilitate the rationalization of wage differentials acrossoccupational levels and firms. The need to formulate a wage policy isillustrated by the estimates of wage differentials between occupationalcategories shown in Figure 3.4. Incentives to reach upper levels of remunerationare small since nominal wage differentials across sectors or levels are small andmay not be apparent to workers. Figure 3.4 shows that, even when valued atparallel market prices, the wage differential between an unskilled worker (firstcolumn) and a manager (last column) is about 1 to 5.

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S. Wane eWon_tization figure 3.4 anole: monthly Incom by occupationa categoy,Parameters 1996-89

3.26 For the remone-tization calculation, theremonetized wage is definedas the level of directly paidmoney income required toenable a worker to purchasehis or her existing finalconsumption basket at freemarket prices.52/ It isassumed that all commoditiesreceived through the lift

autoconsumption scheme orthrough entitlements arefully tradable on the freemarket. The worker thus receives the free marketprice for each commodity " , . . .resold less a trading margin,assumed here to equal 10 lo 6asee- iMto.. go WM D L

percent of the final freemarket price. No attempt ismade to differentiate betweenconsumption made from initial entitlements and consumption financed throughcommodity resale, since the assumption of full remonetization requires that allconsumption be measured at its opportunity cost. We also assume that fringebenefits remain at their current level, and so we can eliminate them fromsubsequent calculations. Finally, we also assume that current free market (orparallel market) prices will prevail after the remonetization. Following thisassumption, the structure of relative free market prices also remainsunchanged. b3

3.27 To illustrate, suppose that the worker receives both autoconsumptionallowances and entitlements in terms of a single commodity. The autoconsumptionand the entitlement are valued at the free market resale price at A and C and atthe official price at Ap and C0, respectively. If M is the initial nominal wage,then the total remonetized wage is defined as

(3.1) W- (M-A0-CO) +A+C.

Since A/A( = C/C0 - P, where P is the ratio of the resale price received by theworker to the official price, equation 3.1 may be rewritten as:

(3.2) W - M4Ao(P- 1) +Co0 (P-1).

Thus the remonetized wage is calculated by adding the nominal wage toautoconsumption and entitlements valued at official prices inflated by a suitable

52/ As pointed out earlier, this principle implies that the worker's current purchasing power isexactly maintained by the monetization of the various components of his or her income. In thissense, it can be said that the reform is merely a change in the economy's numeraire, or a technicalcorrection. The analysis in this chapter does not consider the merits of allowing such an increasein the context of macroeconomic stabilization policies.

53J in other words, the remonetization is contemplated merely as a shift (ceteris paribus) betweenthe current official price vector and the economy's parallel market price vector, assuming relativeprices stay the same. Therefore, physical allocations (of goods and factors of production) are notmodified. Although we know that the future equilibrium price vector would differ from the parallelmarket price vector, the latter seemed the best estimate of the future equilibrium price vector (atleast for consumer goods).

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factor. In this example, the factor (or inflator) is the same for both AO andCO .

3.28 The basic entitlement (BE) and the fish and meat entitlement (FM) arecalculated by applying a separate inflator to each component in the respectivebaskets. Each inflator is calc.lated from the appropriate official and parallelprices averaged over July to September 1989. The revalued baskets are thenmeasured as the sum of their revalued components (see Table 3.4).Autoconsumption and other entitlements are revalued according to a singleinflator calculated from the average ratio of all observed parallel to officialprices. This procedure may underestimate the true values of the complementaryand special entitlements, as consumers will first tend to concentrate theirpurchases on items with particularly large parallel to official price ratios.However, this will be largely offset as the rapid exhaustion of such items forcesother consumers to purchase stocks of the remaining commodities.

C. The Zstimatea

3.29 Remonetized Wages bv Occupations. Based on the assumptions presentedabove, we calculated preliminary estimates of the full remonetized wage alongwith its various components for a number of occupations (Table 3.5). Theestimates show that the average markup on current nominal wages would vary froma factor of about 40 for managers to one of about 15-20 for other levels. Forexample, an unskilled worker whose monthly money wage now is Kz 8,775 (about US$4at the parallel market exchange rate) is actually earning about Kz 175,000(US$70); for a manager, the corresponding figures would be Kz 24,800 (US$10) andKz 960,000 (US$384). These estimates take into account (under "other sources"of income in Table 3.5) goods diverted from enterprises to the parallelmarket.54' Excluding these other sources would reduce the average markupconsiderably (see Table 3.5). Although wage differentials between occupationalcategories seem surprisingly low (5:1 between managers and unskilled workers),it must be remembered that fringe benefits, such as gasoline and car allowances,have been excluded. These benefits are concentrated in higher-level categories.

3.30 The Remonetized Annual Wage Bill. We also estimated the annual remonetizedwage bill (with and without the 'theft" component) that the public sector(central government and parastatals)55/ would have to pay under fullremonetization. Table 3.6 shows that the government's wage bill will rise fromKz 35 billion to Kz 410 billion and that of parastatals from Kz 55 billion to Kz785 billion. Using the average markup for military personnel (who were notincluded in the calculations presented above), we estimate that the military wagebill would go up from Kz 31 billion to Kz 592 billion (Table 3.7).

3.31 Waae-Related Exoenditures and Revenues in the Current Government Budget.The fiscal neutrality of the remonetization is demonstrated in Annex 3.A. Anincrease in the prices charfied by parastatals would compensate for the increasein minimum wages. Therefore, the budget should include both wage-relatedexpenditures and revenues. The expenditure side should include salaries paid tocivil servants and the cost of all entitlements (basic, complementary, andspecial). The revenue side should include the value of the sale of entitlementgoods. Although our estimate of the salary component seems in line with whatappears in the government budget, neither the revenues that are obtained by thesale of entitlements at official prices nor their respective costs seem to beincluded in the current presentation of the budget (Table 3.8).

54/ The inclusion of this item is problematic. Clearly, theft should not be considered as a regularsource of income, and yet the current price distortions provide a strong incentive to divert goods.For equity and practical reasons, we recommend that theft and diversions not be included as incomesources in the remonetization of wages.

55/ Actually, the parastatal category includes some privately owned enterprises because no breakdownof employees between those categories is available.

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TABLE 3.4 ANGOLA: VALUATION OF BASIC ENTITLEMENTSAT OFFICIAL AND PARALLEL MARRET PRICES. 1984

Unit price in kwanzas Basket value in kwanzas

Ouantities Basketof the components

basket (kg) Official Parallel Ratio Official Parallel at parallelItem (1) (2) (3) (3)/(2) (l*(2) (l)*(3) prices (0)

Basic entitlementRiced/ 10 36 261 7.3 360 2,611 3.0Sugarzb 7 38 825 21.7 266 5,775 6.6

BeansC/ 4 46.5 361 7.8 186 1,444 1.7

Pasta& 2 36 933 25.9 72 1,867 2.1Maize flourb' 1 35 500 14.3 35 500 0.6Wheat flourJ' 1 42.78 611 14.3 43 611 0.7

Fresh milk"'d/ 1 23.13 500 21.6 23 500 0.6

Powdered milkaIllI 0.5 138.8 3,889 28.0 69 1,944 2.2

Cooking oil4/ 6 86.7 822 9.5 520 4,933 5.6

Margarine*' 1 155.5 500 3.2 156 500 0.6

Saltb/ 1 3 300 100.0 3 300 0.3Winebl 1 400 3,000 7.5 400 3,000 3.4Soaps' 3 22.8 1,000 43.9 68 3,000 3.4Matches (1 box)O/ 1 1.7 45 26.7 2 45 0.1

seerdJ 9 50 1,500 30.0 450 13,500 15.4Total basic entitlement 15.3 2,653 40,532 46.3

Fish and meat entitlementMeat"/b' 4 190 6,000 31.6 760 24,000 27.4Chicken (frozen)"bI 6 110 2,500 22.7 660 15,000 17.1

Dried fishh/b/ 4 30 2,000 66.7 120 8,000 9.1Total fish and meat 30.5 1,540 47,000 53.7

entitlement

Total basic entitlements 20.9 4,193 87,532 100.0

note: Basic consumption basket quantities are those as of November 1989 for an average formal sector worker; valueof consumption basket does not take into account availability of products in official shops and is in currentkwansas. Valuation made at opportunity cost (parallel market prices).a. Parallel market prices, average 2nd. semester of 1989, source: Policia Economica.b. Parallel market prices of October 1989: source: National Accounts-Schedule of Estimated Consumer Prices.c. Official prices of October 1989: source: National Accounts-Schedule of Estimated Consumer Prices.d. Quantity of goods received is a Mission estimate.e. Quantity of goods received is a Christmas allowance.f. Quantity of goods received is based on nonofficial Information (informal conversations). Availability of goodsunder the meat and fish entitlement is particularly unreliable, with the exception of chicken.

Source: World Bank staff estimate.

XII. MM POLIY ZLZC&TaxO OF X IEZZfON

3.32 This section discusses policy measures that need to accompany theremonetization of incomes in Angola's formal sector. It presents a simpleframework in which to examine the impact of remonetization on the public sectorfiscal deficit and the policy implications. Areas requiring further study oradministrative strengthening also are identified, as are the possibleconsequences of remonetization that need to be considered by policymakers.Finally, an implementation sequence is suggested for one of the reform options.

3.33 This section concludes that the fiscal neutrality of the remonetizationof incomes is contingent on the liberalization of prices - and on carefulpreparation of the remonetization reforms. Estimates of the number of employeesin the public sector and of civil servants should be replaced by actual figures,and estimates of workers' current purchasing power should be refined. Andfinally, the practical, institutional steps that need to accompany the reform(strengthening payment procedures and the like) should be accurately identified.

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TABLE 3.5 ANGOLA: REMONETIZED MONTHLY WAGESOF FORMAL SECTOR WOLMRS BY OCCUPATIONAL CATEGORY, 1989

(in current kwanzas)

Workers Technicians ercent of total wage

Mana- Tech- Mana-Wage component Unskilled Skilled Clerks Lower Higher gers Workers nicians gere

Monetary wage 8,775 15,700 9,100 15,700 31,000 24,S00 7.1 6.3 3.9

Autoconsumption 39,150 65,250 65,250 65,250 31.8 26.0

Basicentitlement 75,005 75,005 75,005 75,005 75,005 75,005 61.0 29.9 11.9

Complementaryentitlement 94,815 37.8

Specialentitlement 352,800 529,200 64.1

Total 122,930 155,955 149,355 250,770 458,805 629,005 100.0 100.0 100.0

Other sources 50,769 62,742 10,016 15,835 51,959 332,535 41.3 6.3 52.9

Total 173,698 218,697 159,371 266,605 510,763 961,540 141.3 106.3 152.9

p.m.

V by category/ Vunskilledworker 100% 126% 92* 153% 294% 554%

Assumptions:Xonetary wage (MI: average of mid-point monetary wage for each occupational category, paid inkwanzas.For the following components, workers incur a 10 percent cost on the resale of goods in parallelmarkets:Autoconsumption (A): every skilled worker in the manufacturing sector receives the equivalentof Kz 2,500 in goods; unskilled workers receive Kz 1,500.Basic entitlements (BE + FM): every worker in the formal sector receives these two entitlements(basic, and fish and meat).Complementary (CE) and special (SE) entitlements: goods purchased under these entitlements havehigher markups; a markup of 50 was applied on both allowances (the dollar black market rate isabout 80 to 100 times the official rate). Only technicians and managers receive theseallowances.Other sources of remuneration consist mainly of theft and diversions, which were estimated bythe Mission. The amount of diverted goods is reported to be about 20 percent of totalproduction of manufactured goods (about Kz 20 billion). Diverted goods were estimated toconstitute a 37.5 percent share of total income for workers, 37.5 percent for technicians, and12.5 percent for each of the other categories. Each category's share of diverted goods isfinally divided by the number of workers in each category. The markup for *other sources ofincome" is 50.

Source: World Bank staff estimate.

A. a Psct of Remontization on the lublic 8 togr ris8al Deficit: A SiIIdPAconin Vzmvwozk

3.34 The remonetization of income would be financed by the direct sale ofgoods to the free market. It is therefore crucial that remonetization beaccompanied by the total removal of all official prices as currently defined.Otherwise the fiscal deficit would increase eubstantially and most publicenterprises would go bankrupt since they would no longer receive sufficientadditional finance from the government to keep them operating. Essentially, theprocess of price liberalization implies that all implicit subsidies in theofficial price system be removed so that the government and the enterprises areleft with sufficient net revenue to finance higher monetary wages. Both thegovernment and the enterprises will have to build up a wage fund to pay thehigher monetary wages, through higher tax and sales revenues on the governmentside and higher sales revenues on the enterprise side.

3.35 The budget effect of full monetization of wages and price liberalizationis neutral since the subsidies implicit in the nonmonetary components of laborremuneration (the entitlements) on the revenue side equal the difference between

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TABLE 3.6 aBGnL"A: siOtlEBbD MONTHLY AND ANNUAL WA6E BILLxNTHE FO OECTOR BY OCUPATINAL CATEZRY& 1989

(millions of current kwanzas)

Workers Techniciars

Totalannual

Category of worker Unskilled Skilled Clerks Lover Higher Managars Total wage bill

Civil servants

Number 39,853 17,712 150,217 19,411 6,319 14,624 250,137

Percent 15.9 7.1 60.1 7.8 3.3 5.8 100.0

Parastatal andprivate

Number 195,639 86,950 37,554 29,117 12,479 14,624 376,363

Percent 52.0 23.1 10.0 7.7 3.3 3.9 100.0

Total

Number 235,491 104,663 187,771 48,528 20,798 29,248 626,S00

Percent 37.6 16.7 30.0 7.7 3.3 4.7 100.0

Monetary wage billin current system

Civil servants 350 278 1,367 305 258 363 2,920 35,041

Parastatal andprivate 1,717 1,365 342 457 387 363 4,630 55,563

Total 2,066 1,643 1,709 762 645 725 7,550 90,604

Wage bill inremonetized system

Civil servants 3,339 1,607 12,634 3,601 3,817 9:199 34,196 410,3S0

Parastatal andprivate 24,050 13,560 5,609 7,302 5,72S 9,199 65,444 785,331

Total 27,389 15,167 18,243 10,903 9,542 18,397 99,640 1,195,681

Wage bill inremonetized systemincluding theft

Civil servants 5,362 2,718 14,139 3,908 4,249 14,062 44,438 533,252

Parastatal andprivate 33,982 19,016 5,985 7,763 6,374 14,062 87,181 1,046,167

Total 39,344 21,734 20,124 11,671 10,623 28,123 131,618 1,579,419

Markupcoefficients forwage remonetization

Without theftcomponent 13 9 11 14 15 25 13 13

Witb theftcomponent 19 13 12 1S 16 39 17 17

Mote: Total labor force in the formal sector is an estimate by the Ministry of Planning of Angola. Allworkers within a category are assumed to receive the average wage of that category. Civil servants do notreceive the kwanxa equivalent of the autoconSuMption allowance; only parastatal workers do. The breakdownof the total labor force between categories was estimated by the Mission based on the UNDP/fank IntroductoryReport and information gathered during the Mission.

Souree: World Bank staff estimate.

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TABLE 3.7 ANGOLA: TOTAL e K-AL WAGE BILL IN 1989 INCLUDING THE MILITARYUNDER BOTH SYSTEMS OF REMUNERATION

Annual wage bill(billions of current kwanzas)

RemonetizedWith theft Without theft

Category Employees Current component component

Civil servantsNumber 250,137 35 410 533Percent 32.3 28.8 23.0 24.6

Parastatal and privateNumber 376,363 56 785 1,046Percent 48.6 45.7 43.9 48.2

Military personnel,governmentNumber 147,500 31 592 592Percent 19.1 25.5 33.1 27.3

TotalNumber 774,000 122 1,788 2,172Percent 100.0 100.0 100.0 100.0

Source: World Bank staff estimate.

parallel market prices and official prices in all components of the supply side(both domestic production and imports). (See Annex 3.A.) A crucial assumptionis that both adjustments are instantaneous. To prevent any worsening of thepublic sector deficit, then, remonetization - viewed as a technical correctionestablishing a new numeraire for the economy - needs to be accompanied by thefollowing price liberalization measures:

* All consumer and producer prices should be liberalized. In other words,producers should be authorized to sell their production to whomever theywant, at whatever prices they can command. And consumers should havethe right to buy whatever product they want, wherever they want -eligibility restrictions should be eliminated from all types of shops.

o Imported consumer goods should be sold at market prices. Currently,these goods, whether imported by the government or by intermediaries,are sold to consumers at artificially low prices. For theremonetization to be fiscally neutral, the government must capture theimplicit subsidies that are currently transferred to consumers throughthe entitlements.

S. Peasrina for Remonetization

3.36 The government accounting framework sketched out above and in Annex 3.Aprovides a basis for identifying the areas that require careful preparation sothat remonetization and the accompanying policy reforms can be introducedsimultaneously and effectively. Work is needed in at least five areas. First,a sound statistical data base should be put in place to measure costs, identifybeneficiaries, and provide guidelines for a future wage policy. Second, a new

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and meaningful retail price index should be constructed. Third, paymentprocedures for civil servants and parastatal employees should be strengthened.Fourth, the implications of the price liberalization should be analyzed. Andfinally, ways to increase tax and sales revenues should be identified to bridgethe financing gaps that will arise because of the time lags betweenimplementation of the various components of the reform.

3.37 Improvina the Formal Sector Statistical Data Base. Careful preparationand monitoring of remonetization require aq accurate statistical data base andfinancial management information system. Basically, the required information canbe summarized in two matrices: one giving the breakdown of formal sectoremployees by occupational category and type of employer; the other relating thefirst to the actual income of each category, specifying the components of eachcategory's income (monetary wage, entitlements). This information, which is notnow fully accessible, is crucial for accurately calculating the remonetized wagebill for the government, parastatals, and the private sector. It is reportedthat both the Ministry of Planning and the Ministry of Finance are undertakinga census of civil servants that should be available soon. The scope of thiscensus should be extended to parastatals, the military, and the private sector.

TABLE 3.8 ANGOLA: STRUCTURE OF WAGE-RELATED EXPENDITURESIN THE CENTRAL GOVERNMENT BUDGET. 1989

(billions, at official prices)

Ministry ofFinance budgeta/ Staff estimates

Total recurrent expenditures 89.0 n.a.

Personnel 53.0 100.9

Salaries 43.0 66 0b/

Cost of basic entitlement

for civil servants 12.6

for parastatal employees 18.9

Cost of other entitlement 3.4

Other expenditure 36.0 n.a.c/

Other revenues from entitlement 4.8 n.a.C/sales

Total payments from sale of 34.9entitlement

a. Actual figures.b. Includes civilians and military personnel.c. "alue of complementary and special entitlements for civil servants.

Source: World Bank staff estimates.

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3.38 Constructinc a Retail Price Index. Remonetization will require a newwage-indexation scheme. In order to formulate a sustainable real wage policy,the government will need a retail price index. This index could be constructedby the National Account Unit of the Ministry of Planning and the Economic PolicyUnit, which is collecting price data in parallel markets. The institutionalframework for carrying out this task will have to be determined.

3.39 Strenathenina Pavment Procedures. Obviously, payment procedures willhave to be accelerated and strengthened. The remonetized wage bill will be about13 times higher than current monetary wage payments. Workers should be able towithdraw money at will for transactions from whatever accounts they may have orto write checks on the acr -nt, instead of holding their total monthly income incash or in kind as now. This will require an assessment and any necessarycorrection of all financial networks - the Treasury, the central bank, the BancoPopular, parastatals, and the private sector. Speed in registering financialoperations (deposits, withdrawals), the quality and accuracy of records, and thenumber of operations that can be handled daily are crucial issues to beconsidered.

3.40 Procedures will need to be established for paying civil servants andparastatal employees. Civil servants are now paid either by the Treasury or thecentral bank (BNA). Civil servants in the provinces are reportedly paid bysubsidiaries of the BNA; those in the cities by representatives of the treasurywithin each ministry. The Ministry of Internal Trade administers the variousentitlements and keeps records of the buying-rights deposits made on theemployee's account at the SNA. Parastatal employees reportedly receive most oftheir monetary wages directly in cash. The private sector seems to operate ina similar way.

3.41 Analyzing the Implications of Price Liberalization. The priceliberalization that must accompany remonetization will raise official prices toparallel market levels. his prior rise will affect various economic agen*s:private enterprises, paras_atals, and official and private retail shops. Mostprivate enterprises are already operating in parallel markets, so they should notbe adversely affected by the price liberalization. Parastatals are anothermatter, however, and the most worrisome aspect of the price liberalization iswhether they will be able to react rapidly to such a dramatic change in theircosts and prices. Their financial and accounting units should therefore beaudited to identify bottlenecks and weaknesses in implementation capabilities.

3.42 Although parastatals can use parallel market prices to recalculate costsand establish new prices, their technical capability to do so needs to beassessed. Since most public manufacturing enterprises are monopolies, priceceilings and a rapid opening up of foreign trade will be needed to avoidmonopolistic pricing. Financial discipline will have to be enforced through atight monetary policy that limits transfers from the government. Cross-enterprise cred-its and debts will also have to be monitored to prevent loss-makers from circumventing the targets of the overall monetary policy.

3.43 All shops will operate at market prices and in kwanzas. Although theprice liberalization measures could be announced overnight, their implementationshould be prepared carefully to avoid windfall speculative profits. The besttime appears to be the end of the month, when artificial speculative shortagesare less likely because of the low level of stocks. Stock revaluation seems,however, unavoidable but manageable.

3.44 Financina the Public Wage Bill. The payment of higher wages to civilservants will be financed by higher tax and sales revenues. Currently, thegovernment is either importing consumer goods directly or allowing privateintermediaries to do so (see Chapter 1). Imported goods are then redistributedto consumers through the entitlement scheme. In both cases, the rent thatresults from the resale of those goods in parallel markets should be captured by

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the gpvernment in order to finance the higher wages that will have to bepaid. / In the government accounts, the increase of wages will be offset bya corresponding increase in tax and sales revenues. The government' s capabilityto collect this new level of tax revenues needs to be tested, however.

3.45 Evaluatinc the Financing Gan. If real wages are to be maintained duringthe remonetization period, much of the existing system will need to betemporarily maintained - especially provisions covering lower-level workers. Atthe same time, the government will need to accumulate a wage fund to pay thehigher monetary wages at the end of the period. Maintaining the old system whileprogressively implementing the remonetization will depend on the government' sadministrative capacity. The size of the temporary financing gap could bedetermined accordingly.57 /

C. Othet Possible Pollv Imwlications of the Remonetizat on

3.46 Three policy areas will need to be monitored carefully duringremonetization: real wage and price policies, monetary policy, and incomedistribution policies.

3.47 Real Wage and Price Policies. Inflationary pressures can follow anincrease in domestic demand. For that reason, it will be important to monitorany demand-increasing effects of delayed tax collection, increases inparastatals' deficits, or uncontrolled credit policies. If workers' purchasingpower under the current system is overestimated, so that the wage correctior.overshoots its target, this too could boost domestic demand and accelerateinflation. In addition, since workers' income *vill no longer be permanentlyindexed to the rise in parallel market prices, a new wage indexation scheme withappropriate rules will be necessary in the new monetized system. Thus, asalready mentioned, the government may wish to develop a retail price index andto study possible wage indexation rules carefully.

3.48 MOneY Surn1y . The remonetization of wages proposed here is fiscallyneutral, so no additions to the money supply are required for its implementation.However, by definition remonetization implies a change in the numeraire for theeconomy. The relation between the current stock of money and total transactionsin the economy at the new prices is still unclear. On the one hand,remonetization will reduce the volume of transactions and will squeeze the otherparallel "currency" (beer). Full implementation of the new system must alsoimprove the fiscal deficit by expanding the tax base and, possibly, by reducingparastatal deficits as more transparent accounts allow better management. On theother hand, if the velocity of money circulation remains the same, the stock ofmoney might need to be adjusted if the parallel price level is not to decline.

3.49 It is difficult to predict what the demand for kwanzas in the newremonetized environment might be. The squeeze on other parallel "currencies"such as beer, the expected supply response, and the wage remonetization will allincrease demand for kwanzas. Monetary targets, such as credit ceilings, moneyemission, and interest rates, will probably have to be established according toa tight monetary policy aimed at establishing financial discipline amongparastatals. Monitoring the aggregate money supply should therefore be anessential part of the overall adjustment program.

3.50 Income Distribution. Adverse redistributive effects might be expectedin the short term because the reduction in transaction costs will hurt the urbaninformal trade sector, where most of the parallel market transactions now occur.For example, Luanda probably has about 300,000 to 400,000 people, many of themchildren, who make a living through transactions between official shops and

561 Unification of foreign exchange markets would eliminate such rents for everybody.

571 The financing gap is caused by the absence of time dimension in our accounting framework. There,a change in the numeraire of the economy is instantaneous. Obviously, this is not the case in thereal process of remonetization.

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parallel markets. Although job creation will occur as a result of the economicreforms, this will take time, and most of the urban poor will probably not bequalified for jobs in the new labor market. Other redistribution effects willalso occur. There would be a decrease in net subsidies to the private sector andin the rents derived from intermediate transactions. And, in the longer term,redistributive effects are likely to arise from changes in the retail tradesystem. Thus if the entitlements were to be scrapped entirely, there would beside effects that the government may want to compensate for temporarily.

3.51 But what policy measures should be taken to attenuate those effects isnot clear. One approach might be to design a targeted program of support to theurban poor that uses the basic entitlements schemes and networks. This shouldbe combined with agricultural policies that provide incentives for agriculturalproduction so that those of the urban poor who would prefer to return toagricultural activities could do so.

D. A Lua sted Se=encina fOr Remonetization

3.52 The ideal, full-fledged remonetization of wages could be implementedovernight without worsening the fiscal deficit if three conditions are met: theprices of domestically produced goods are simultaneously liberalized, importedconsumer goods are sold at market prices, and the Angolan authorities aretechnically capable of administering the payment of the new wage bill. That allthese conditions could be met at once seems unlikely, however. Moreover, thesuccess of remonetization also depends on each economic agent (government,parastatals, private sector) being able to cope with entirely new costs (of laborand other inputs) and prices. And there remains the issue of being able toidentify an accurate multiplier factor that maintains the purchasing power ofworkers and guarantees that relative prices are kept the same.

1. A Two-Stacae. Too-Down Approach

3.53 The difficulties that can be foreseen at this stage lead us to suggesta gradual two-stage, top-down strategy of remonetization.58 / The finaldecisions on the appropriate approach to wage remonetization depend on theoverall strategy chosen for price liberalization and exchange rate adjustment.To test the economic agents' capabilities to carry out the remonetization and toidentify possible bottlenecks, we suggest the following two-stage approach.

3.54 First Stage. In the first stage, the wages of managers and technicianswould be remonetized, implying the elimination of the complementary and specialentitlements and a limited but significant price increase, possibly combined withthe opening of a special foreign exchange window. This first step will permitthe authorities to identify the major impediments to overall reform by testingthe critical paths of the reform in its two dimensions (domestic price increaseand payment of new monetary wages). This first step will cause losses ofpurchasing power for employees other than technicians and managers because of thelimited increase in the official prices of parastatal enterprises' products. Thedifferential between the parallel market price and the official price for a givenproduct is part of the other workers' income.

3.55 Managers and technicians are selected for the first stage because theirnumbers are relatively small (about 50,000), which simplifies the process; thecommodity composition of their two main entitlements is the easiest to identify,since nearly all of those goods are imported; and the social cost of this

So/ This suggested approach is necessarily a second-best solution: given the linkages betweeneconomic sectors, and the fact that it is very unlikely that all firms have the same proportion ofmanagers and technicians, this approach accepts that relative prices will be slightly modified.

59/ Therefore, it is possible to isolate this partial remonetization from changes in domesticrelative prices.

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partial remonetization is probably smaller than under other possible options.Table 3.9 presents a chronological list of steps to be undertaken for the firststage of the remonetization.

3.56 Second Staae. In the second stage, all other wages would be remonetized.This stage would follow an analysis of the results of the first stage undertakento identify any weaknesses in the institutional system. For each category, theremonetization would be introduced without prior notice, in a once-and-for-alladjustment package. A shock approach could be considered, once measures toprotect the poor are in place.

2. Estimates of the Financial Shift from Remonetizin Two Entitlements

3.57 The remonetization of complementary and special entitlements will implya salary increase of 2,436 percent for managers, 1,082 percent for lower-leveltechnicians, and 1,380 percent for higher-level technicians (Table 3.10). Theresultant increases in both the government' s and the parastatals' wage bills willbe financed by additional revenues from the sale of imported goods and byincreases in the prices of parastatal goods. Table 3.11 gives the result of atentative estimate of the financial implications of the remonetization of thosetwo entitlements.

3.58 The remonetization of managers' and technicians' wages will ir-.reasepublic expenditure by an additional Kz 150 billion for the government and Kz 178billion for the parastatals. The government will rely on the sales of importedgoods at higher prices to meet its new wage bill. Assuming that the governmentimports all the commodities inclnded in the two entitlements that are beingremonetized and that those goods are sold at market prices, an implicitdevaluation of about 5,000 percent is applied to the exchange rate on thesespecific goods. So, if the government is importing, say, USS150 million worthof goods related to those entitlements, it will gain about Kz 220 billion byselling the goods at market prices, which is more than enough to cover its wagebill increase. These imported consumer goods could be sold through a specialforeign exchange window; the special shops could be forced to operate exclusivelythrough this window for these imports. A useful complementary measure would beto allow an own-funds import scheme to operate simultaneously.

E. Conclusion

3.59 The remonetization of incomes in Angola could be considered a necessarycomponent of a comprehensive economic reform package. Provided that relativeprices remain unchanged, remonetization is fiscally neutral. However, itn'cessitates a comparable correction in the nominal price levels. Obviously, ashift in the economy's numeraire does not produce, by itself, a change in thelevel of aggregate demand. Nor does it correct the proconsumption bias inherentin the current system of foreign exchange allocation. And quite apart from theadvantages that would result from making the economy's accounts more transparentand meaningful, it should also be considered that stabilization measures couldbe extremely difficult to monitor in the absence of a redefined numeraire.

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TABLE 3.9 ANGLA: SG S¶3 SEUNCN FM ThEIAZATION OF m#a E' AND TCRNzCxaNS 9 SALAES

item Implementing agent Output

Step 1: Preparing the remonetizationSet up data bases

Civil servants Ministry of Finance Number of managers andMinistry of International techniciansTrade Breakdown by category

Current total remunerationBreakdown by type

Parastatal employees (and Ministry of Planning Number of managers andprivate sector) Ministry of Industry technicians

Ministry of Finance Breakdown by categoryCurrent total remunerationBreakdown by type

Private indexes National Accounts Retail Price IndexEconomic Policy Parallel market prices

Estimate remonetized wagesCivil servants Each ministry New wage billParastatal employees Each parastatal New wage bill

Strengthen payment proceduresTechnical capability of DNA and BPA Mastery of payments of allpayments and of wiring funds Ministry of Finance civil servants and

Parastatals parastatal employees indays

Availability of bank accounts Bank accounts for managersand checks SBA and SPA and technicians

Strengthen tax collectionproceduresIncome tax Ministry of Finance List of managers and

technicians/ taxpayersSalem tax Ministry of Finance List of special shops and

definition of rules

Step 2: Remonetizing complementary and special entitlementsIncomes policies

Announce increase of monthly Governmentwages of managers by Parastatalsabout 0: technicians byabout __%

Suppress complementary and Ministry of Internationalspecial entitlements Trade and parastatals

Price policiesIncrease parastatal sales Parastatals and governmentprices by _ (this shouldoffset the wage increase)Increase consumer goods Government and specialkwanga pricesO in special shopsshops by _%

Internal trade policiesAllow free access to special Government and specialshops, operating now in shopskwanzas

Tax policiesEnforce income tax of % Government Tax collection on new

for managers and techinTcians incomes should improvesubstantially

Abolish rents of the special Government Opening of the foreignshops exchange windowa'

Monitoring the remonetizationCalculate ex post purchasingpowersSurvey the critical areas,bottlenecks

a At first, prices in special shops should be higher than parallel market prices because of qualitydifferentials and to avoid shortages; then these prices should be free. This could easily beoosbined with the opening of a special foreign exchange window, through which those goods would beixported.

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TAMLE 3.10 M_G2L: RXANPLES LF SAAY INRAES [a MAKAGERS AND TECHNICIANS(millions of current kwanzas)

TechniciansLower Higher Managers

Monetary wage (current) 15,700 31,000 24,800Remonetized monetary wage 185,520 458,805 629,005Wage increase 1,082% 1,380% 2,436%

Source: World Bank staff estimates.

TABLE 3.11 ANGOLA: THE FINANCIAL IMLICATIONS OF A PARTIALREMONETIATION FOR MANAGERS AND TECHNICIANS

(millions of current kwanzas)

Technicians

Total wageLower Higher Managers bill

Government

Monetary wage (current) 3,657 3,095 4,352 35,041Remonetized monetary wage

(two entitlements) 25,742 38,314 97,220 185,214Financing needed 22,085 35,219 92,868 150,173

earastatalsMonetary wage (current) 5,486 4,642 4,352 55,563Remonetized monetary wage(two entitlements) 38,614 57,471 97,220 234,388

Financing needed 33,128 52,829 92,868 178,825

Total financing 328,998

Source: World Bank Staff estimate.

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AMizx 3

Am ACOGm FRWWW OR TMNVAS F&90

3.60 The way the Angolan economy functions can be summarized in a very simplemodel linking economic actors (the central government, households, parastatals,and the private sector) by accounting identities. The model summarizes economicactivity in current kwanzas and in nominal terms, taking into account the sharesof economic activity carried out at official prices and those at free marketprices. Expenditures and incomes valued at free market prices are denoted by anasterisk.

3.61 This framework provides a means of asses« .ng the impact of a full wageremonetization on the fiscal deficit and of identifying potential inflationaryeffects of remonetization policies.

a. The Model

3.62 The economy functions as follows:

Parastatals produce domestic goods (Q a) that are sold at official pricesto households. They pay wages OWpa) to their workers, and pay the statefor all their intermediate inputs (ic1,). Globally, they incur losses(L'p) that are entirely state financed. Therefore, the parastatals'account is:

(3A.1) Lpa + Opa - +pa j icpa-

* The private sector's account is similar. However, we can assume thatit includes net profits after taxes (Ppr). Private sector production,wages, and intermediate inputs are denoted by the subscript pr.

(3A.2) pr- Wpr + iCpr + ppr.

* Households receive wages from parastatals (wpa), the private sector(w r), and the state (wv). Private sector profits are transferredentirely to the households. In addition, households also benefit fromentitlements (c) that are resold in parallel markets at free marketprices. The markup resulting from this resale (c* - c), is capturedentirely by households. Notice that the informal trade sector istherefore included in the household sector. Moreover, for the sake ofsimplicity, we assume that autoconsumption is included in householdentitlements. On the expenditure side, households buy final consumptiongoods at free market prices from parastatals (Q;a)* the private sector

(Q,pr)' and the state (fm*). Thus the household account is:

(3A.3) Ppr + Wpr + wpa + W, (c+ - c) - a Q;r fin-

e The state imports intermediate and final consumption goods that are soldto households (fm), parastatals (Ic ), and the private sector (icp,).It also pays its civil servants (v51 and covers all the net losses ofparastatals (L8). The state receives revenues from sales (fm + ic,, +IcP,) and from exports (X). For simplicity, we assume that exportsconsist of a single good (oil, for instance). State expenditures andrevenues are valued at official prices and at the official fixedexchange rate. The state's fiscal deficit (FD) is therefore:

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(3A.4) FD + X + (fm + lcp. + lop,) - .pa + Vs + (fm 4 I¢pa e lCpr)

3.63 Notice that there is no private sector surplus in this economy.Therefore, the current account deficit (CAD) is equivalent to the state fiscaldeficit (FD). Moreover, in this simple framework, we can assume that the currentaccount deficit equals total imports minus exports. This condition is:

(3A.5) CAD - (fm + icpa + *cpr) - X FD - + WS.

3.64 From equation 3A._ and adding the first four equations to cancel outterms on both revenue and expenditure sides of the identities, after rearrangingterms, we obtain an interesting equilibrium condition in this economy:

(3A.6) (c* - c) - (Qpr (pr + (Q - Q(p) + (fie - fm)-

This condition simply means that the markup in the revenue/demand side of theeconomy (the net product of the resale of entitlements) must equal the sum ofmarkups on the expenditure/supply side (the various components of supply valuedat the differential between free market and official prices).

B. Monstization of This UConOmv

3.65 The monetization of this economy implies simply that wages now equal apaid money income that is necessary to purchase the entire supply of goods atfree market prices. Identities 3A.1 to 3A.3 are now:

(3A.1*) Lpa + Qp;, ' Wp + ICPA

(3A. 2*) Qpr w iCpr 4 Ppr

(3A.3*) P;r + wpm X wp Q + W.e' Qpa + Qpr + fmo.

3.66 Notice that with monetization, households are now purchasing all goodsat free market prices. An interesting result can be obtained by summingequations 3A.3* and 3A.3. The value of the markup on the previous entitlementsequals the sum of the differentials between remonetized incomes and previousmonetary incomes:

(3A.3 bis) (c -c) . (Vpr - wpr) ' (Wps - wp) + (* - Ws) + (Ppr - Ppr)

3.67 The fiscal deficit (FD*) in this monetized economy is:

(3A.4*) FD* + X + (fmh + icp8 + icp,) - L, + v + (fm + icp, + icpr).

Notice that once monetization is achieved, the state is selling fm at free marketprices fi*. Summing equations 3A.1* through 3A.4* gives, after cancelling outand rearranging terms:

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(3A.4*f) FD + X - (fm + 1cpa + lopr) .

This expression is identical to the current account deficit in the previoussituation:

FD( - (fm + Icp.G I cpr) - X - CAD - CAD -FD.

Therefore, the fiscal deficit in the context of a remonetized economy isidentical to the fiscal deficit in the previous situation.

ANGOLASTATISTICAL APPENDIX

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Table 1: A.rLAI *uL oFum me 9W.L. waz vRtmx.uaw

Offici Price. Pore IIG Pri¢e atie

Engage /wiO in Us e Kaaaa/ unit is USa * /P

190 196 Oct69 1960 1905 Oct9 196 Oct09 105 Oet"0 198 1tw9

RiAce (g) 21.0 85.0 16.0 0.70 1.17 1.20 1000.0 200.0 0.67 0.07 g.s0 5.0

S.. (kg) 9.0 90.0 190.0 8.00 8.00 6.38 2000.0 G000.0 1.85 2.14 22.2 81.6

Chicken (kg) 06.0 110.0 110.0 2.68 8.67 8.7 8000.0 210.0 1.S8 0.89 45.1 U.7

Gomm (kg) 40.6 41.0 40.5 t.35 1.80 .1 2ee0.0 OO.0 1.85 0.S8 44.4 10.0

Fresh fish (kg) 20.0 s0.0 8o.0 0.90 1.00 1.00 1100.0 2000.0 1.00 o.7 10.0 0.7

sugar (kt) 88.0 22.0 s1.0 1.17 0.78 1.27 20.0 s0.0 1.6? 0.29 118.6 21.1

soet (kg) 9.0 8.0 8.0 0.10 0.10 0.10 800.0 100.0 0.20 0.11 100.0 10O.0

Ored (kg) 17.0 17.0 17.5 0.87 0.87 0.s0 800.0 16100.0 0.31 0.86 2.4 s7r1

P*ets (kg) 29.0 81.0 36.0 O.9 1.05 1.20 2000.0 1400.0 1.38 0.86 64.8 27.0

Idible oil. CI) 42.0 ".0 06.7 1.40 2.17 2.69 106.0 310.0 0.67 0.16 15.4 5.8

MWaie flour tgs) 8.5 174. 18.0 0.25 0.16 1.17 180.0 600.0 0.10 0.1S 18.6 14.S

power Miilk (kg) 90.0 90.0 110.6 8.00 8.00 4.68 4000.0 4000.0 2.67 1.4 44.4 20.0

Mrerage. (kO) 100.o 116.0 3118.8 8.3i 8.07 8.18 1000.0 1800.0 0.67 0.86 0.6 6.4

s-ft Drin. (1) 27.0 40.0 40.0 0.90 1.o8 1.38 S0.0 1800.0 0.80 0.86 80.0 25.0

iueorta beer (1) 40.0 SO.0 10.0 1.88 1.7 1.67 1S80.O 1100.0 1.00 0.84 80.0 80.0

ini et) 8165.0 400.0 0.00 11.05 18.85 8000.0 85100.0 2.88 1.25 9.9 8.0

Coffeo (kg) 111.0 M.0, 892.8 8.68 9.6 W8.0 40.0 1s00.0 2.67 0.84 8.68 8.8

Poftto. (kg) 2.8 48.0 0.o.e 0.92 1.8i 000.0 8000.0 0.18 1.07 20.1 0.7

-ene" (kg) 7.0 18.5 16.8 0.25 0.45 0.S6 700.0 2000.0 0.47 0.71 81.9 S11.2

gm0 (1) 6.0 5.0 8.0 0.17 0.17 0.17 Ji00.0 800.0 0.20 0.10 60.0 100.0

noln. (kg) 10.0 u.0 45.0 0.68 0.45 1.50 0o0.0 2000.0 6.00 o.n 7102.5 *4.4

-arlic (ke) 47.0 45.0 200.0 1.67 1.10 6.67 4000.0 1000.0 2.67 1.79 0B.9 28.0

OTR aOLI

dSoa (kg) 20.0 S7.0 :2.6 0.90 1.20 0.78 1s00.0 o S0.0 0.67 0.18 27.0 21.9

Match.. (box) 1.8 8.0 5.0 0.Ot 0.17 0.17 45.0 0.00 0.0C 0.0 9.0

Te*ti I. cloth (W 2.O0 210.0 6.67 0.85 0.00 0.00 0.00 0.0 Gm

sleSeto (each) 811.0 11U0.0 20.U8 87.67 0.00 0.00 0.00 0.0 up

Ca.ieo neg. (1) 200.0 210.0 800.0 6.67 0.31 10.00 10.0 12000.0 8.00 4.29 48.0 40.0

Pen a_e (pair) 470.0 000.0 700.0 1.07 20.00 25.88 41000.0 60000.0 S0.00 21.43 71.0 Ga.7

Radioe (oach) 2000.0 200.0 4000.0 66.67 10.35 131.31 2000.0 41000.0 16.67 16.07 7.6 11.8

TV ocet (ceah) 25M00.0 25000.0 25100.0 68.38 0M5.38 018.35 410000.0 o.0o 10so.n 0.0 1A.0

Bicycle. (seek) 6000.0 500.0 166.67 1.6 0.00 0.00 0.00 0.0 so

Cigarro (s) 20.0 40.0 40.0 0.67 1.85 1.15 800.00 1000.00 0.85 0.8 12.5 28.0

Com"t (N80 0.0 120.0 a .e 4.00 a.0 a .0 a.f..* 6.0 a.a. r.0

fte. (souc) 80.0 J0.0 .e 1.67 a.. 6.0 a.e. e.g o.a a. .

KOVO.G. (C) 4.0 4.8 n.e 0.14 n.e n.e n.8 n.e ".a 6.0 a.0 a.e

1ate. an (12 U 161.0 18.0 .0 0.00 n.0 n.e n.e a.e n.e n.m 0.g n.o

domI lin (I) 12.5 28.0 n.e 0.68 a.. n.C n.m *.g n.e . .e 6.0 a.a

- M_A, i_OWlU M FLOW, i L= 0S M"

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Table 2: ANGOLAs COMPOStTION OF IPORTC t 1985-1988(US$ millions)

1985 1986 1987 1988

ANIMAL PRODUCTS 141.6 55e9 67.4 90.5

Meat 70.4 35.8 41.1 46.2Dairy Products 68.4 19.3 26.0 43.1

VEGETABLES PRODUCTS 100.2 60.5 36.2 73.8

FATS AND OILS 67.1 28.9 26.0 34.8

INDUSTRIAL FOODS,TOBACCO 132.9 77.6 90.3 129.2

Beverages,spirits,etc 28.2 13.3 18.2 24.1

:-INERAL PRODUCTS 5.6 1.4 1.7 5.1

CHEMICALS 105.5 48.1 36.1 71.9

PLASTIC MATERIALS 33.0 19.5 8.6 38.9

SKINS AND HIDES 1.7 2.8 0.4 0.8

WOOD AND WOOD PRODUCTS 1.9 0.5 0.2 0.6

PRINTING MATERIALS 17.3 9.4 7.1 10.8

TEXTILES 124.8 54.5 29.6 60.0

SHOES 19.8 13.1 8.6 19.5

GLASS AND STONES 22.0 9.9 3.0 3.8

METALS 68.3 44.2 19.9 42.3

MACHINERY AND ELECT. APPL. 233.0 156.8 117.6 127.8

TRANSPORT EQUIPMENT 155.0 111.0 54.8 134.1

Vehicles 149.2 98.1 45.1 99.0

OTHERS 28.3 13.9 9.5 17.1

TOTAL 1258.0 7f8.0 517.0 861.0

SOURs $ociete Geneale de Suwvatile@@ (SO)

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Table 3. Taxes on Petroleum Sector

Case I CABINDA CONGO KWANZA CONGO------------------------------------------- _-------------------

011s 000 B/day 255.984 1.0325 1.7552 30.6078Gast 000 B/day 4.787 0.0000 0.0000 0.0000oil price/B 19.000 17.0000 17.0000 17.0000Gae price/B 12.000 0.0000 0.0000 0.0000Exchange rate 60.000 60.000 60.000 60.000Gross sales (B Kz) 107.773 0.3844 0.6535 11.3953Prod. tax rate 0.200 0.1667 0.1667 0.1667Tax revenue (B Kz) 21.555 0.0641 0.1089 1.8996Oper. costs (B Kz) 9.229 0.1374 0.3669 0.7533Amort. (B Kz) 12.167 0.0986 0.2537 1.3671Investments (B Kz) 6.273 0.0294 0.0781 0.1861Inv. premiun 0.500 0.0000 0.0000 0.0000Prod. premiun/B 5.770 0.0000 0.0000 0.0000Total premiun 35.483 0.000 0.000 0.000Transac. tax base 50.893 0.148 0.033 9.275Transac. tax rate 0.700 0.000 0.0000 0.0000Trans. tax rev. 35.625 0.000 0.000 0.000Income tax rate 0.658 0.658 0.658 0.658Income tax rev. 19.197 0.055 -0.050 4.849

Total tax rev. 76.377 0.120 0.059 6.749

Case II CABINDA CONGO KANZA CONGO

Oils 000 B/day 255.984 1.0325 1.7552 30.6078Gass 000 B/day 4.787 0.0000 0.0000 0.0000Oi1 price/B 19.000 17.0000 17.0000 17.0000Gas price/B 12.000 0.0000 0.0000 0.0000Exchange rate 60.000 60.000 60.000 60.000Gross sales (B Kz) 107.773 0.3844 0.6535 11.3953Prod. tax rate 0.200 0.1667 0.1667 0.1667Tax revenue (B Kz) 21.555 0.0641 0.1089 1.8996Oper. costs (B Kz) 9.472 0.1411 0.3766 0.7731Amort. (B Ks) 12.167 0.0986 0.2537 1.3671Investments (B Kz) 6.273 0.0294 0.0781 0.1861Inv. premiun 0.500 0.0000 0.0000 0.0000Prod. premiun/B 5.770 0.0000 0.0000 0.0000Total premiun 35.483 0.000 0.000 0.000wransac. tax base 50.650 0.145 0.023 9.255Transac. tax rate 0.700 0.000 0.0000 0.0000Trans. tax rev. 35.455 0.000 0.000 0.000Income tax rate 0.658 0.658 0.658 0.658Income tax rev. 19.149 0.053 -0.056 4.836

Total tax rev. 76.159 0.117 0.0.3 6.736

- 82 -

Table 3 (Cont.) Taxes on Petroleum Sector

Cage II GCABINDA CONGO KWANZA CONGO

01i1 000 B/day 255.984 1.0325 1.7-52 30.6078Gas: 000 B/day 4.787 0.0000 0.0000 0.000001 price/B 19.000. 17.0000 17.0000 17.0000Gas price/B 12.000 0.0000 0.0000 0.0000Exchange rate 90.000 90.000 90.000 90.000Gross sales (B Kz) 161.660 0.5766 0.9802 17.0929Prod. tax rate 0.200 0.1667 0.1667 0.1667Tax revenue (B Kz) 32.332 0.0961 0.1634 2.8494Oper. costs (B KX) 14.087 0.2098 0.5600 1.1498Amort. (B KX) 18.251 0.1478 0.3805 ?.0506Investments (B Kz) 6.273 0.0294 0.0781 0.1861IAv. premiun 0.500 0.0000 0.0000 0.0000Prod. premiun/J 5.770 0.0000 0.0000 0.0000Total premiun 51.657 0.000 0.000 0.000Transac. tax base 77.665 0.219 0.040 13.893Transac. tax rate 0.700 0.000 0.0000 0.0000Trans. tax rev. 54.365 0.000 0.000 0.000Income tax rate 0.658 0.658 0.658 0.658Tncome tax rev. 28.026 0.081 -0.081 7.261

Total tax rev. 114.723 0.177 0.082 10.110

Case Ila CABINDA CONGO ZVANZA CONGO

ils 000 B/day 255.984 1.0325 1.7552 30.6078Gas: 000 B/day 4.787 0.0000 0.0000 0.0000Oil price/B 19.000 17.0000 17.0000 17.0000Gas price/B 12.000 0.0000 0.0000 0.0000Exchange rate 60.000 60.000 60.000 60.000Gross sales (B Kz) 107.773 0.3844 0.6535 11.3953Prod. tax rate 0.200 0.1667 0.1667 0.1667Tax revenue (B KR) 21.55S 0.0641 0.1089 1.8996Oper. costs (B KR) 9.594 0.1429 0.3814 0.7830Auort. (B Kz) 12.167 0.0986 0.2537 1.3671Investments (B Kz) 6.273 0.0294 0.0781 0.1861Inv. premiun 0.500 0.0000 0.0000 0.0000Prod. premdun/B 5.770 0.0000 0.0000 0.0000Total premiun 35.483 0.000 0.000 0.000Transac. tax base 50.529 0.143 0.018 9.245Transac. tax rate 0.700 0.000 0.0000 0.0000Trans. tax rev. 35.370 0.000 0.000 0.000Inome tax rate 0.658 0.658 0.658 0.658Income tax rev. 19.125 0.052 -0.060 6.830

Total tax rev. 76.050 0.116 0.049 6.729

- 83 -

Table 3 (Cont.) Taxes on Petroleum Sector

o __--.ff..----------- -------------------------

Case IIIs CANINDA CONGO RAN&ZA CONGOen -- eeC---0---------C--- - -- - - --CC-------------

Oils 000 SIday 255.984 1.0325 1.7552 30.6078Gas$ 000 B/day 4.787 O.0000 0.0000 0.0000Oil pricelB 19.000 17.0000 17.0000 17.0000Gas price/B 12.000 0.0000 0.0000 0.0000Exchange rate 90.000 90.000 90.000 90.000Gross sales (B Kz) 161.660 0.5766 0.9802 17.0929Prod. tax rate 0.200 0.1667 0.1667 0.1667Tax revenue (3 Ez) 32.332 0.0961 0.1634 2.8494Oper. costs (5 KX) 14.330 0.2134 0.5697 1.1696Amort. (B Kz) 18.251 0.1476 0.3805 2.0506Investments (B Kz) 6.273 0.0294 0.0781 0.1861Tzv. premiun 0.500 0.0000 0.0000 0.0000Prod. premiun/B 5.770 0.0000 0.0000 0.0000Total premiun 51.657 0.000 0.000 0.000Transac. tax base 77.422 0.215 0.030 13.8?3Transac. tax rate 0.700 0.000 0.0000 0.0000Trans. tax rev. 54.195 0.000 0.000 0.000Income tax rate 0.658 0.658 0.658 .0.658Income tax rov. 27.978 0.078 -0.088 7.248

Total tax rev. 114.505 0.17S 0.076 10.097

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Table 4. Angolas Central Government Employment and Salaries,1988

No. of Wage bill MonthlyPosition persons mill. Kz wage Kz

Dirigentes 68 23 28,385Responsable 4,341 964 18,503Tecnico S. 498 162 27,034Tecnico M 3,536 776 18,287Tecnico B 28,359 4,457 13,097Adm. 25,237 2,440 8,056Operario E. 18 4 19,194Operario 9,948 1.010 8,464Otros 4,030 605 12,503SUB-TOTAL 76,035 10,440 11,442TOTAL Civil 120,035 16,482 11,442

Group A 1/ 8,443 1,924 18,995Group 8 1/ 1115,92 14,557 10,871Defense 2/ 120,000 24,200 16,806TOTAL GOV. 240.035 40,682 14,124

=-.___.__________ ---------------------------.--------------

Sources Ministry of Finance and estimates.11 Group A includes the first 4 categories, and 3 the rest.2/ Estimate.

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Table S.Angolas Foreipn exchange component of CentralGovernment expenditures (2 in 1989 budget)

_.________ --_ -__.. --____ -------- _____

Service commissions 60.0Personnel training 20.0Goods and services 10.0Kedical supplies 100.0Fuels 0.0Medical services 100.0Other services 10.0Food 80 0Clothing and rents 0.0External cooperation 60.0Scientific research 100.0Representation allowances 100.0Visitors and conferences 10.0Other current expenses 5.0Capital expenditures 40.0Pension contributions 0.0Subsidies and globalappropriation 0.0

Source-----inistr---of___Finance.------

Source s Ministry of Finance.

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Table. 6: Angola: Debt Service as of 31112188(USS millions)

---------------- _.-_-------------------------------------------____________

----------Arrears--------- ----Debt Service-----

1986 1987 1988 1989 1990 1991…----------a-------------- e------------------- _------------------a--------

Western Countries 13,165 51.153 196,109 387,883 326.831 368,547

Commercial 9,635 21,90Q 40,846 40,624 21,055 10,694Capital 8,035 18,015 34,805 37,427 19,450 10,124Interest 1.600 3.888 6,040 3,197 1,605 570

Governmental 3,530 2,131 2,513 8,192 9,576 9,911Capital 1,793 711 677 4,969 6,439 6,901Interest 1,736 1.420 1,836 3,224 3,136 3,010

Secured 0 24,885 143,226 214,592 190,809 180,608capital 0 20,614 112,303 150,755 137,217 137,823Interest 0 4,271 30,922 63,838 53,592 42,785

Rescheduled before 31/1 0 2,234 9,524 84,869 76,038 147,146Capital 0 0 4,382 42,208 42,891 115,486Interest 0 2,234 5,143 42,662 33,147 31,660

Takulas Petrtoleum Sona 0 0 0 39,605 29,353 20.188Capital 29,528 22,034 14,749Interest 10,077 7,319 5,439

MultilateralCapital 0 0 1,407 3,699 3,737 3,918Interest 0 8 843 1,914 1.719 1,506

Zastern Block Countries 25,201 72,607 591,982 618,460 508,235 610,997

Governmental 19,524 54,611 441,037 470,664 386,291 245,674Capital 18,036 51,807 391,703 424,651 348,928 223,917Interest 1,488 2,804 49,334 46,013 37,363 21,757

Rescheduled 5,677 17,996 150,946 147,796 121,945 365,323Capital 2,500 15,000 133,970 135,954 114,005 327,111Tnterest 3,177 2,996 16,976 11,842 7,940 38,212

So------rce-----------ational--------------a--------of-----An---__ola------Source: National Bank of Angola.

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Table 7: Angola: Balance of Payments, 1987-90(in millions of US$)

1989 19901987 1988 est. proj.

Exports of goods and NFS 2,409 2,606 3,151 3,188Oil sector 2,159 2,181 2,740 2,804Nonoil sector 163 311 274 249Nonfactor services 87 114 137 135

Imports of goods and NFS 1,795 2,570 2,416 2,582Consumer goods 783 1,125 1,072 1,115Capital goods 520 247 201 250Nonfactor services 492 1,198 1,143 1,217

Resource balance 614 36 735 606

Net factor income (218) (538) (751) (787)Factor receipts 7 14 13 20Interest and dividends 7 14 13 20

Factor repayments 225 552 764 807Interest 90 367 461 482Dividends and profit remittances 135 185 303 325

Net current transfers 52 32 (4) (2)

Current account balance 448 (470) (20) (163)

Net medium and long term capital 55 (199) (155) (335)Net direct foreign investment 119 131 201 100

Inflows 364 454 483 520Outflows 245 323 282 420

Other M & LT capital inflows 359 504 506 355M & LT capital outflows 423 834 852 790

Public sector amortization 423 834 856 790Other 0 0 6 0

Net short term capital anderrors and omissions'/ (834) (256) (754) (560)

Overall balance (331) (925) (929) (1,078)

FinancingChanges in net resources (-)2/ (17) (49) 6 (30)Identifiable financing 349 974 923 452Net accumulation of arrears 149 967 (252)Debt rescheduling 200 7 1,175 452

Gap 1 0 0 656

1/ In 1989, short-term capital is estimated to be -553 million of US dollarand errors and omissions -190 millions USS.2/ Corresponds to changes in net international reserves from 1988 onwards.Source: Banco Nacional de Angola.

- as -

Table 8: Angola: Population, Economically Active PopulationfForal and Informal Sector

(in thousands)

AM taos io 16 u t xe w

1. Ptapl<4iem Cs) 5.3 .*M Tom 0.784 0,499 9. 9.41 9.8 0.*Pe. oW0Wb seW (1 8.13 8.4 1. 2.11 .7 1.3 .13 2.1 2.71.1 SfPhi Cal) 3.741 8.260 .907 406 4.dU *4. 4.60 4.75 4.416fPime (.1) 2la 8.,80 8,91 4,446 stow1 4.66 4,015 4,944 8.07

1.20 tO 9 (.1) 1,74* 2.19 a 1. 2.0 $. so 8w * 3.1781 8,110 f6. 14 (.1) 6* 77 S 6 1. 1 SAW 1.19 1.,1 1.1ml 1,22i1 to " (.1) 8,0o 8,860 4.041 4,8"3 4.10 4.,1 4.,9 8.061 .S2Jose a Cal) S" 11 t9 8" g7 1 W 26 a"J1.4 W*sa 41) 180 £148 1.1 Soon6 2.778 S.16 8.206 8.447 8,0bfava et (3) 0.48 0.54 8.183 .S# 7.8* ?. 7.80 T.71(3 of .5 g am) 34.Scu 13.8 =.06 29466 80660 8.6 83."s 60.40 87.h01.4 RaseS (b) 4.6, 8.860 8.M *11 6.W . 6. 1 .,75 6.29 8.26amsmil s t. (S) %."1 2.166 0.01 0.6-3 0.84 0.8 0.283 a.1oC( of 6.6.5 Om) s.9No IMA.M* ".960 41 .561 69.1601 6.106 64. 19 04.60 62.16

2. _a|"sal Is .t3. (el) 91.00 8.0?4 8.414 8419 S. a8.66 8.11O 4.000 4.01(S oftow1 ow) 46-. 46.13 44.21 IMAM 4.143 "103 41.413 41.143 40.60(3S of 3844 (el)) 41.060 8.8151 00.646 6.0O0. 66.80 7063 7"98 79.83 71-9.o86.. ealIapt of _ al I* a.e (s 20(in ofsow 0o) 2 o.0a

2.1 Piowl E .65t Cvi I C"l) 83o W no a1l(S ofam. "Ove Ow (01)) 17.0U 10.90 10.J3 1.1624 ft I eapsm~ClaSS les(.6 6o5 651 a86 6so M 414M(?d o4. atl. Owm (01)) 10. .0 15.413 15.84. 14.7-9.8 aIII owtowel (6) so 21) u1 218 as 21_menu so 14o V4 140 .1

CB t . e.Iwo Pw (01)) 3.m 8 .05 0 8.401 $0.$ 5.21.2.4 jjftl _ 1rfIw -1;)'28 6so an 83 a3'n &l a6Co ef %Am# pop) SO.10 0-M 0.01 V/1S11 2.60 19.1L

CB3o W$= pow) 80.45 U.146 16.10 26.13 Wg.9e 1.t00S Idereel a_~ c1(.() - 2.4 - 9.4) (a) 1.70 S.ta s.i 8.011 8,01 S.175o of ol Po) I1.8M St.?" 8U.745 21.16 16 81.74(3 dm. SV*t e(.)) 74.2 1596 *5.91 70.83 77. 165f 17.79

2.0 IAm.qIpd Qb) n 15 so 67 1t(3 6 .o.5 ow). o^(vd o to# o )) 0.S5 0.060 0.46 *.GM 0.06 0.91Courl of Om. gm1.091 1.,1 1. 2.11f83 1.1esouarces International Labtorf07±..ad Ujogl e*tlasta.

- 89 -

Table 9: Angola: Breakdown of the Labor Force by Economic Sector, 1988(number of workers; Mission estimates)

t A_UD*%W 11 ol_e..9 ~~~~~~~~CawuSt P0vowt S 900s01 re Pw ain Canwal fmtewo,s so..,.

Owmee. PFrvet. . Tout1 Osm . Prtivete. ?5tml QD.. PPivet O. 'foul m|*ale..

1. I sefter UNw lm)1.$i 331*1" 861.46 Man11 vs.36 466.l06 16.00 loo.m0 10.05 18.986

1.1 riesiter. P. 6.61% MOM 46.154 I.11. foam .8 8oo .OISA 33.815 18.8 1.4sja.w1us (em) 1t04 14.410 15,840 Same 91.61 *3.06 o.m v.oi G812111

1.1. N0 (Agrivaltar) S.13 U8.11 18.W1" 10.,ID 816 10.1l" 419 T.005 0.061.1.3 46AMI (Ceffr) 19g ease 0.46 866 3111001 11.06 0.1011 8.83 1.073

1.1 b_ 7 , _oo ua .F s*.m 86*6 i. 14 u.a i,netl1 40.u 4.401 8.409.1t _w8 e 1MJow a 03 U" mo4 Soon iu.m 119.6W 1M3 46.90 10.405

How ( * t ,4 *) ) .11 an an RoM AS711 U481 31 9 011r oF $ t0 491.1.1NU UM (,MWu S PRO046) 1.141 18.86 17.1181 Sam6 WA.S8 86.707 0.105 0.106 8.01.1.s8 N406 (CON40"up) Sam 1,.471 *.m W."e 1.S1 4#.Un 0.81I 6.01 7.Us1.1.4 Say"~0 k Qwag We".4) 8.,86 1.413 6.46 7.406 1.11 10,400 8.145 0."1 1.75

1.8 1..'.. 310.0.10 861.46111 'nm INTAW 31*11.4 136.01 13.11 1.370 Mom8 8.8n1.8.1 lWe (trAise & Telem101814 f S 11 SW U 6 1.46 6e.ls ".J1 4.43 1.M 12.USt.8.1 N46 (lattral$ Vedo) 1.116 17.8135 falls707 q .0 317.60 48.01 1.413 9.4151 0.0131.8.8 n meo(Eerausl 1t.) 8n 1.410 1.70 W6 8,0o1 slow 0.1 1.16 0.W1.8.4 Ws" (auu"i Sam) 0 4,.4 4. * O,.8 q.811 Oims 2.41 1.461.8.1 t 1.8.4 0.46 8l.11 o "04.615 17.70 116.446 1160 7.005 86.045 11.435

1.8.886IPMG (pImlaa) 0 0 &W Z.40 0 1o.n6 0.745 0.100 o.=.1.8.6 1NM (Pw.ils Wes) 46 0 W 46 0 42S 0.10 0.00 0.G761.8.7 NO"U (Pleain) 9"1 16 1.U86 1.o6e gm 1.us 6.4111 CON 0.8'S

8.014"14 Gbe r) 1.66t 0 1.01 1.319 a 1.Sa 0.46 0.00 0.81.8.9 MOMS CA.wa) 1.46 S 1.46 5.465 a 8406 U.1.1 .. 05 0.461..I 6 1613sop 14.46 1.061 35I136 $0.819 1.21 81."0 14.1.46 0.40 51.03%1.8.1 1 N (uaoI.) 48.M 1 46 48. 911 40.411 8 '1.317 16.6 0.115 14.8611.8-.1 "Dow QfoWl) it'4s 0 0a6.e 41.*0 0 43,916 WM. O-.00 6.7011.8.138 1 45 on1 66 we 30 .o 1.7 0..M 0413 0.1.S.14 UAX (0sl.we) 1.77 49 1.108 8.6am an 4.8S1 1.473 O-.s 0.1131.845o (beets) 1.14 0 law . SIM 1. 0.90 0.001 0.461.S.14 gm g08.4 78 w ?.6 5.01116 9.65 1.1331.D.U17 618 0 93 1123 0 1.11 0.813 0.00 0.461.8.13 S.L NW. gwa. otmv) £a 0 1S 4o 0 W -. 610 0.06 0.131

Pt l es~8 2U0O 6.4Oter aete" 91 te) ,11.6

Ossesga pinw*s.. Po..alfltes) 147s|"lou .46." -

.Klord sfeter C(alo e. 8.J0106 7.8111

1.1 AgriogStere, Picklas (b) 2.1101.461111 R.=01.1.1 %uax bOlt. ega aroS 116.461.1.1 PlaibIa 1111.4011.1.St. Rtel 2,e '110.46

2.1 sleftfetarlae C.) 8,o.74 1.011.1.&16ftfawefterIa & twAeadoft sel741

1.8 saftler (4) Mom8 0.11.8.1 Oaa46I swde t(ael _a.b..) Mom

8. lumod 1.40 1.

4. 1.0741. (1. *a1. e 8.) benalonl Ip ao04vo uugaGt0lqa 8,916106.05alaw o

th) C min Awibo of6il %FM* 01.119 604%e oIg 48 eral uist . amS tea latemamaNOW04 .r .I . e.eilla S& ~ W .roo s rals . ai . ... mS ose m

6) m I o _be lutW atU l dNW Ie eaftefted ma .gId.ltel .IOvtlestoa 06 _e. ON to te _.a belt eope. ad 16 lo f#11ag

te) _ tsiue to em. &.1O SaV lAS-I . er 64 es l omlm mmfa.~1da & hsadivest(s) _oaJ to out toe oisIdehs lafess mobs emmsetd t o lea .01telOI

te of _6... 10s oe eto el G a S f1twe

Table 10: Angola: Formal Sector Civilian Employment, by Region and by Sex

Lbor Force Labor Force (by Sex) Labor Force (by Seglca)(number of wodres) In I InA

1967 1Male Femle Total Male Femle Total male Femle Total

LUNda 153.165 41,764 194,970 76.62 21.42 100.02 30.62 32.52 31.12Cabiak 13,949 3,647 17,7" 76.41 21.62 100.02 2.82 3.02 2.61

aire 5,507 1,543 7,050 76.12 21.92 100.02 1.12 1.22 1.1Zeamp 23,490 7,613 31,104 75.52 24.51 100.02 4.71 5.92 5.01mlI 22,854 6,213 29,067 76.62 21.42 100.02 4.62 4.62 4.621. mlott 15,o32 5,160 20,292 74.61 25.42 100.02 3.01 4.01 3.22Halale 14*797 3,693 16,691 79.22 20.82 100.02 3.02 3.02 3.02Ie Il.otta 36,423 1,183 39,610 97.01 3.01 100.01 7.71 0.91 6.32L. Sal 6,008 1,092 7,100 84.62 15.42 100.02 1.22 0.62 1.11K. S"l 24,17S 10,161 34,336 70.42 29.62 100.02 4.92 7.92 5.52Bengela 62,592 16,327 ",918 613.51 16.52 100.02 16.61 12.72 15.82Kuambo 24,725 9,565 34,290 72.11 27.91 100.02 5.02 7.42 5.52ale 13,286 4,691 17,976 73.91 26.12 100.02 2.72 3.62 2.92

ulico 6,6s6 1,675 10,560 64.12 15.92 100.02 1.62 1.32 1.72mIobw 14,723 5,075 19,796 74.41 25.62 100.02 3.02 3.92 3.21

Nails 26,967 6,373 33,340 60.91 19.11 100.02 5.41 5.01 5.32Kmeme 3,692 1,164 4,877 75.72 24.32 100.02 0.72 0.92 0.82R. gKbaup 5,433 1,295 6,727 60.86 19.21 100.02 1.12 1.02 1.12

TOTAL 497,826 128,674 626,500 79.51 20.52 100.O0 100.02 100.02 100.02

Source : Ministry of Planning

- 91 -

Table 11: Angola: Population, 1900-86

Y1a PPULATIOaN(ThouUsd)

100 2,7161*10 2.0221"00 3.1311030 3,31640 3,738logo 4.1461060 4,640

1076 elm2160 7,1T1l0 7.01616 6,110

1164 6l,3106 8,764

uurs Amiairlo Istatlitloo and Institute Iactlialde EstatletlI".

- 92 -

Table 12: Angola: Economically Active Population by Economic Sector, 1985

Number of PercentageSectors employed workers of total

Total 2,109,083 100.0

Productive sector 1,552,912 73.6Industry 237,516 11.3Construction 155,298 7.4Agriculture and livestock 748,094 35.5Silviculture 8,720 0.4Transport 177,566 8.4Communications 12,219 0.6Commerce 186,457 8.8Others 27,042 1.3

Nonproductive sector 484,956 23.0Counmnal services 47,034 2.2Education and services 139,655 6.6Culture and arts 24,528 1.2Health, social assistance, physicalculture, sports and tourism 103,160 4.9

Finance and insurance 19,466 0.9Administration 118,872 5.6Others 32,241 1.5

Unemployed 71,215 3.4

Source: Instituto Naecional de Estatistica (INE).

- 93 -

Ma

THIRTEEN STIEE ENTERPRISE ACCOUNTS

The accounts for each state enterprise are presented in separate tableswith the name of the enterprise in the top left corner. Four partial accountconsolidations are also included: SONANGOL and ENDIAMA; the transport andservices sector (TAAG, ANGONAVE, Porto de Luanda# and ENSA); the manufacturingindustries (CERVAL, CAFANGOL, and PESCANGOLA); and the utility companies (ENB,ENATEL, CFL, and EPAL). Consolidated accounts for all 13 state enterprisesexamined are presented in Tables 2.10-2.14 in Chapter 2.

-94-

7w I 14q 17 I%* 1.64 1e9 1 1416 6 s tw146 t6 1940UniMSo) I K64. UN M". UA Mss. UN Kom. UN Mg... US$ I I;a .u.t gagae ( ,IIqmae)

i. toel .eV. (ji.S. t 4..) 13,106 22.307 16.670 84.484 31.811 36.25 1.60 43.981 ".7 8.3 1836,118 $1.45 60.S 356.160.w4

,S1. Cwrt roC *e 11.85 16.1"7 2.S7 3.7 18.071 116 14,734 42.91 1U.1141 86,15 1700 48.64 61.58 W087,678 51.81L.1.. ftle. (0 4 8) 10.606 IS.179 13.081 32,788 13.801 36,16 13,864 43.481 14.M7366.368 1230.46 44.78 40.6110 U6,188$1.1121&.1. 0t5or r"gvau 713 1.066 1.371 1.160 1.48 I 71a 10= 1.1 s1 . .4s

S1.. C8 .agt 4rao.tr c 8r6S 0 3.1 0 6,40 0 7,076 0 7.07O 0 1 8,116 .76 6.460 7.076 7.0?6i.2.1. fr4w *tBv*% I 0 0 a 0 01.2.3. frof teu4Iio mmar 86 0 3,68 0 460 0 7,07 0 T. 076 0 1 as 8.75 0.40 7.076 7.076

1.3.321. *ePis ou"We,E I 0 0 0 0 0*-1.2.2. e*the subsidies 8o 0 8,7 0 6,41 7,070 7,ON I go 3.7 6.460 7.076 7,.07

1.3.39 frees bogo I 0 0 0 0 01.3. t ei%sj revonve 0 0 0 0 0 0 0 0 1 0 0 0 0 0

..3z. caitt transform 0 0 0 0 0 0 0 0 0 01 0 0. 0 0 a1.3.1.1.7 orivabo eO~ 0 0 I 0 0 0 0 0

f....ree *ublaog64.r 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 01.8.1.1A. ;A.essmo1o Ous 0 0 I 0 0 0 a 01.3.1.3.2. ia.1 inerswo 0 0 I 0 0 0 0 0

1.3.1.3. fro .bresd 0 0 0 0 I 0 0 a 0 01.4. oter I-qw voae 0 4.060 1.68 2.64 1 4.019 1.869 2.642 0 0

3. 724oeqitre & ."S lgdiag 13,71 18.900 1. e1o 22.45 17.9SU 20.867 10,811 S5,8W0 15,386 V889 18.74 41,15 44.6 64,611,U 49,

2.1. Carret" *8d. lu*7e. 13O271 17,21116 10 .SIS0.4 17.48 3.16 "19.3 ., IS.81 38.318 1.04 89,64 42.813 84.3P 6...1i.1.1. 0...e.,1a oatawitures 8.45 18 7,428 13.*5 .4 5 17.68 4,40 36l.081 4,409 3.M 114.886 31.37 24.970 31,91 31.480

2.1.1.1. P.rmmml 1.911 1.406 101 1.308 1.61 1,4"4 2.04 1.S6 1,9 1 I 8.818 3.194 3.361 3.861 S.72.1.1.1.1. V. 0 .. 1,9 6 1.7 8 1.6 887 3,0 so 1.46 61s 1.2.477 ..4f1 3.476 2.3.16 2.7183.1.1.1.3. 0thu. .0mm. St0 la t 76 13 7S 14 9O t1 946 I am0 734 76 41 4o312..1.3.a. ? seoabia e . 86 39 o 43 42 1 9 so 31 42 4do

2.1.1.3. leit.raalb% muWtd 248 1.101 1.870 12.68U 2.660 16.200 3.466 14,813 3."5 1.6 1132.431 14.4 51.00 17.23 1,18613X.1.1.3.1. Ilna 2urie1l 134 6.101 660 9,35 1. 610.Mi 1.417 4.8e, 1.40 10.6 1I .34 10.08t1 11,705 1.S3 13.13.1.1.33.2Oth.er _de 0 3.4"0 0 .480 3.44 3.09 8.60 1 12.466 .480 3.346 3.067 3.600:.1.1.2.3. OVt#r u1 1.68 770 46 1.314 1.69 1.8 1.436 1.480 1.8 I1.7t 1.78 8.19 .6 3.6

3.1.1.3. Aewtiartioa 3.9 0 3.963 0 2.7t9 10.4iO 9.to I 3.M0 8.45 2.7 10.461 9,18=3.1-.. :as De.s 6 o p oa 0 814 0 7O 0 676 0 37 0 5e1 814 0 676 SW? 316

2.1.2.1. Msest.c ak.soo deo. 0 0 0 0 I 0 0 0 0 02.1.2.2. P2o. 4;r89 fo re. 0 $14 0 7" S"7 3 s I S14 74 GM 7 us

3.1.3. Cureewstraga., 6,77 3,140 1.7 56493 10.635 6.24 14.161 010 10.626 6,346 I0.9211 17.40 * 7G,412 16.32.4 16.923.1.3.1.2b 9v8e2v e r~ I 0 0 0 0 02.1.3.3. fi Coetro, Goveramos. 07 3,009 1.779 4,75 W.8 4,9 14.381 $.6? 10.63 4.647 ,.76 16.1164 1u.314 230. 18.273

3.1.3.3.1. ta m.ee S.w 3.000" 11,760 4.7 W.6 4.6* 14.315 6.350 10.89 4.647 9.M1 6.8" U U.2U 2030. 118.373.1.8.2.2. awitaeobud"$ 0 0 0 0 * I 0 0 0 0 02.1.8.3.8.oga tumd S 0 19 a o 3s 368 1 3 19 8 35 38

3.1.3.3. to abroad 0 141 0 , 1.16 1,69 1.89 I 141 "a 1.85 1.09 1.6993.2. C24.24l ugidwise 0 1.764 0 1,8= 0 3,13 0 2,4 0 314 I1 ,784 1,e S.13 S"4 S"

3.2.1. p;..d .e;itl formoel.O 0 UO 0 nO 45 4 S34S 20 13 344" S"3.2.2. coiee1214.mf.r. 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0

3.2.1.z. topriwvat 0 0 o0 0 0 0 03.2.2.3. to CoAtr remt 0 0 I 0 0 0 0 03.2.3.3. to abrd 0 0 I a 0 0 0

2.2.3. othe 1.736 0 1.407 1., I 1.74 1.407 1. 0 0

S. Corps" 86l1.. (1.S.- 3.1.) (1.316) o0 (8.118)12.3* 10s(3s. 1W (4,87 ?.o6 84 8,46 I (04) 0.196 0.748 3.45 3.61y

4. 94u..ti.m 8.le.. (S. - 8.) (SW $.317 (3.3=).4n S.06 13.136 2.440 7.601t 7., 2, I 2,86 10.10 18.78111 10.140 10.810

8. ht4E6 agae a.wa I

6 oall bolebon (4. - S.) (G) 3.217 (3.SM36 .471 S. 713.16 3.440 7.661 7.722 2.M 1 2.Ut07 10.13 9.731 10.140 o0.8o

7. PI.aeim7.1. laSeoA&leI

.1.3. piate I7.23. o_m; i

7..1. O.W.A. I7.2.2. mmralo bas I

0. C=ef4mo _- (6) 3.217 (3.3=12)4t 7 ,1 8 13.111 2,490 ?.68 ?7. 3.7 I .8W 10.139 18.71 10.140 1O.O

6. 45a _ aaas an. 1(9 - 9.1 8.36 6.16 8.64 16.1 8 SW 9.764 HIM 11.32 9o 111.0 O.W .1 3.m SOW*.1 1romofeee to the U.B.L. - 0 8,76 0 6.480 0 W.7 0 7.076 0 I 8 ,6 6.460 7.070 7.07.. a Tnud.r fkm b UAW.S 6,1 8,149 U.7 8.600,56 0,4 14.881 8,4GO 1S.61a 6.340 1 9.40 17,478 16.86 3.84 14.9761.8 Cawww. of 45ra916 logo". (GM0 MIT1 (3.8AM1.L7 3.87 1,18011 3.490 ,68 7TIM 2.75 I 2.88 10.139 18,781 10.146 16.81

_. 1 _. f . .be

- 95 -

*EOL TRAN ?1 I Anos.. Part 4. Veer 11660 19?1661601 1919869lo lo 1967 196 11160 1990

L AAA. A EWA V I Ai(e) I W". UN KugO UN Ness- MO Read. lUN we. UN I is arest ICea (WI It late)

*. tet., rer (1.1. to 1.4.) 0,018 2.221 10,370 U6T 8.916 1.W 128 1.18 IT."?7 .972 110.314 11,486 10,142 13,617 19.78

1.1. Current POVaw. 8,008 2,221 10.170 W 6.416 1,234 12,206 1.51* ST."?7 1.972 110.=4 11,488 10.142 1t817 19.7691.1.1. .sIes (a & *) 7.924 364 9.371 SU 0,907 315 1e197 424 MOOT 414 I0260 9.68 9,20 12.M 17.9211.1.2. Other revenuo so I.487 1.200 we a 911 1 1,004 29 1.SU I.O6 1.748 92 1,01 1.048

1.2. Curent tretefore 0 0 0 0 0 0 0 0 0 01 0 0 0 0 01.2.1. from prlvete mate I 0 0 0 01.1.2.frm,aIla.or 0 0 0 0 0 0 0 0 0 0) 0 0 0 0 0

1.2.2.1. prig ubsidies d 0 0 0 0 01.2.2.2. other ubsidio I 0 0 0 0 0

1.2.3. from abred I 0 0 0 0 01.8. C"sPelr,',e 0 0 0 0 0 0 0 0 0 l 0 0 0 0 0

1.8.t. Ca.itol trenore 0 0 0 0 0 a 0 0 0 0 0 a 0 0 01.3.1.1. Bfra private jfter I 0 0 0 0 01.8.1.2. fr publle sowtor 0 0 0 0 0 0 0 0 0 ° 0 0 a 0 01.3.1.2.1. Inveetient fund 0 0 0 0 01.81.1.2.. ee.tai Ise.r,t 0 0 0 0 0

1.3.1.3. fre abra I 0 0 0 0 a1.4. Other revees I 0 0 0 0 0

2. Total apendtutr & ne lendio 4*,e7l 4.8,0 4.34 40 ,S 0 4.6tl 4.176 4,W2 8.400 7,076 G 9 ,6 6817 8.416 6,419 13.070

21.7 Cu,.t Uspb ditue 4,026 4.64 4.8O 4,118 S.775 8A.1 a8.t2 8.702 4,610 S.02t I 0.260 el.6a 7, 7,5S7 9.0,

2.1.1. WOPrt;OW eapORdStuIeO 4.955 4.146 4*442 3.979 8.741 8.786 3,764 3.697 4.170 4.46 I 68119 8,441 7.40 7.421 6,62.1.1.1. Ppeotl 1.992 674 2,242 n19 1.90 600 1.90i2 0 1.640 1SI 2,66 2.162 2.59 2.402 2.0t1

2.1.1.1.1. We 1.769 202 1.972 1 1.780 170 1,667 140 1,697 131 1.691 2,16 1,9216 1,86 1.7682.1.1.1.2. Othor ream. 202 88 26 SU 6 265 0 3 1 212 a 897 57 6 2182.1.1.1.8. 7eclsIeul *walmt. I It1 4 196 2 148 2 a S 7 "1 1" 14U 81 s9

2.1.1.2. Istoreeisto ispwu 1,91 38.081 2,18 2.667 1.717 2.7a0 1.t81 2.7 2,06 8,6 4,96111 SAt 4,5"1 4.60 6, SO2.1.1.2.1. Raen, materIs:el, .2 1.1980 1414 1.07t 1.070 664 1.116 660 1.167 1,6f8 I 2,48 2,467 1.eso .136 8.82.1.1.2.b. Other Goods 482 1.63 67t 1,704 459 t.956 442 1,68 612 1.96 I 2.305 2.810 2AM 2,2n 2.m2.1.1.2.S. Oter 208 6 24 6 t6 1a 0 48O 0 S 246 a1s 1a 426

2.1.1.3. A.rtleatlen 4 441 a1 8W 88 841 40 877 4 6 801 S 464 4U 87 417 8672.1.2. nthiret Vamte 4 69 86 1s 80 118 89 105 485 9 118 170 146 148 9ua

2.1.2.1. Flme an" douse. 49 s6 as o 0 480 49 16 85 86 482.1.2.2. Finer.. Aar" foreo GO 18 118 0 106 8 go 1n 11 108 9

2.1.8. Carenat tre rfoeo 24 0 tO 0 1 0 O 0 7 0 24 10 1 9 72.1.3.1. to privte r st 0 0 0 0 02.1.3.2. to C4struleo *rnnt 24 0 tO 0 1 0 9 0 7 0 36 10 1 0 7

2.1.8.2.1.Wteee 24 tO I 7 I 24 10 1 a 72.1.3.2.2. rsitence bud4s 0 0 0 02.1.3.2.3. esocia fund 0 0 0 0

2.1.8.8. to abrad I 0 0 0 0 02.2. Csoitsl aepeditro 7T7 6le 40 66 17S 6" 865 47 716 2,61 I S.875 6t8 671 648 3.451

2.2.1. Fived eswitel formation 0 10t 0 197 62 us 612 180 20 2.186 NIO5 19 188 198 2,4751.2.2. Capitol trefor° 0 0 0 0 0 0 0 0 0 01 0 0 0 0 0

2.2.2.1. Xto priveat set I 0 0 0 0 02.2.2.2. to Central Oevrnaent 0 0 0 0 01.2.2.0. to abroad 0 0 0 0 0

9.2.3. Other 767 S1 40 460 118 871 8 6 0 4 1&. 4" 6 631 978

S. Current blame. (1.1.- 2.1.) 3.77 (2-0.1s) .7 (32 8.10 1 ts.686 0,466 (12.14)18,1 (8.041)1 1,964 2.a35 2.S14 6,261 10,148

4. Cperetie Sales.. (I. - 2.) 8.30 (2168) 6.0t (8.18) 4.988 (8.*) 6.1Jt (2,7)12.807 (5.704)1 86 2.1tt 1.648 5.897 6.648

S. Interes payment arrears 0 0 0 0 0

S. Overall Ieleneo (4. - S.) 8.,0 (2,e63) 6,061 (8,9) 4,48S (8.33) 0.121 (i,112.397 (B.70M)i S6 2.119 1.648 5,307 6,6"

7. FPlnemn I 0 0 ° 0 0?.1. ister"al I 0 0 0 0 0

Y.1.1. Public i 0 0 0 07.1.2. PrIvet. I 0 0 0 0 0

7.2. eontIe I 0 0 0 0 07.2.1. 0.N.A. 0 0 a 0 07.2.2. Cmemrelel bealMw 0 0 0 0 0

S. comi*60mwe ebeub 8,30 (2.63) 6C0n (1.18 4.96 (a8.33 6.121 (2,8)1.897 (8,0)l 86 2,11 1,648 8.89 6.69

9. Nat traser. 3 (9.2 *0 O.1 9. 0 8,2 4W(,60.6061 (8.918 4.960 (8,83) 6.18 (2,761)2.404 (5,76)1 G1U .1120 1,644 5.46 6,769.1 ?ranseo to th. U,.LlL 0 0 0 0 0 0 0 0 0 01I 0 0 0 0 09.i11 eorefrgutheU.LiLe so 0 10 0 I 0 9 0 7 01 2* 10o 1 o o9.8 Cwvermof aporotla. Susea 8,3 (2.6 6.801 (8,91) 4,965 (t,83 4.121 (2,761)120.8 (5,70)1 8 2.11 1.6 8,89 6,606e

(e) lA eineaeeetlble Neaslm

96 -

ann ~~I -iCefenpi, Peog.ael 'tow I XU, 106 190 1409 190 I 110 10 1100 110 110"Cer.sel Wit(o) I K . UN Kos. UN Ibve. SI IMve. SO Kw. UN I In w.r..ut 1etam(lllteMNe)

1. Total rtvew (1.1. f. 1.6.) 1.so8 0 1.090 64 1.297 64 1.10 on 1.409 71 1.306 2.62 1.37 2.340 2.13

1.1. CAat "1,ve 1306 * .I'm 14 1,"9 040 *1.1 on 1,409 751 1 1.' 2.629 1.3 2.340 2.131.1.1. sales (s4 8) 1,2m 1.600 1,00o 1.213 0G 1.410 an 1,353 725 I1.277 2.681 s,16m 2 .2 6 2S4111

.A.2. Otherreve 30 90 (10) 64 (13) 90 (9) as 0a 80 (2) 71 0s as1.2. Current tronefore, 0 0 0 0 0 0 0 0 0 01 0 0 0 0 0

1.2.1. fre velv .et* satw 0 0 0 0 01.2.2. fm public "atop 0 0 0 0 0 0 o 0 0 og o 0 0 0 0

1.2.2.1. price subsidlie I 0 0 0 0 01.2.2.2. other subsidle I 0 0 0 0 0

1.2.3. fr* abroad I 0 0 0 0 01.3. Capitel r*vwo 0 0 0 0 0 0 0 0 0 01 0 0 0 0 0

1.3.1. Ceitei trasf.re 0 0 0 0 0 0 0 0 0 aI 0 0 0 0 01.3.1.1. free privata reter I 0 0 0 0 01.331.2. from pbl.eeor 0 0 0 0 0 0 0 0 01 0 0 0 0 0

1.3.1.2.1. X _avetont fid 0 0 0 0 01.3.1.2.2. capital ircre I 0 0 a 0 a

1.3.1.3. fro. ibred I 0 0 0 0 01.4. 00th. r _aw 0 0 0 a

2. Total expediture A rtC lendin 24 62OO 1.069 800 1S,91 722 1.662 a00 1.300 9`4 i 1.t46 2.060 2.056 2.461 2.304

2.1. Curret eplditures 62 0 &-S 09 1,t1 72 1.062 009 100 OM 1.2464 2.06 2.0ilS 2.46 2.1042.1.1. Oernlg expenditures 36 620 1.24 009 900 7S2 1,191 704 6 1.11 S I 0 2.06 1.620 1,6 2,061

2.1.1.1. Persnl JJ 0 l0 t120 t 102 so 30 13S 01 3 3a 13 195 2M2 2172 w.e.".3. 3 1o as Ul 60 102 40 13 8tI 30 172 142 2a2 1102.1.1.1.2. Other _~. 0 *I 0 0 0 0 02.1.1.1.3. ?TehnalcI caeet. 62 34 10 0o o 2s 0 a 664 10 2S

2.1.1.2. I..te Xte te ;nert 0 0 1UG 010 0 340 1.009 US M 06 774 1. s 1.740 1.332 1.0 1.7002.1.1.2.1. Aw atarlale 6 1.000 06 U 40 §0 OM US 73 1 1.61 1.U18 1.464 1.5162.1.1.2.2. Other goedo v 6 42 12 1i I 0 44 42 0 22.1.1.2.3. 0th.. 10 13 1tO 13 01 O S24 1t0 3i0

2.:1.1.. Amolz-atn I Go 1 so 1 1 0 7 0 0o .1.2. 1tor tA ymf 0 0 0 0 0 0 0 4B 0 0 0 0 46 1i:2.1.2.1. Mane.. oke do.m. 0 01 0 0 0 0 02.1.2.2. Plin.. heareio feres 48 0 15 0 0 0 46 is

2...Current trenefor. So1 0 013 0 428 0 400 0 477 0 I 81 010 42 400 4772.13.1. to oeriO ti O i 0 0 0 0 02.1.3.2. to Central O&creoegt se1 0 o01 0 425 0 86 0 47 0 So1 01 42 430 477

2.1.3.2.s. teom, 89 S1 42 40 477 0 501 610 426 400 4772.1.3.2.2. roltee.. budet a 0 0 0 02.1.3i.2.8. eods$ fund g 0 0 0 0 0

2.1.3.3. to ibred 0 0 0 0 02.2. Citela#poeadture 0 0 0 0 0 0 0 0 0 01 0 0 0 0 0

2.2.1. Mneid tpitel feriatlee I 0 0 0 0 02.22. Coplel transfers 0 0 0 0 0 0 0 0 0 01 0 0 0 0 0

2.2.2.1.1t private e.d.w 0 0 0 0 02.2.2.2. to Cetral ourr amt I 0 0 0 0 02.2.2.3.a. abe6 0 0 0 0 a

2.2.3. Othr 0 0 0 0 0

3. Current bleat. (1.1.- 2.1.) 6SW (6S) (184o (a) (am) (134) 13 (191) i) 62 (30) (1" (12) (417)

6.Oseroaig leatl. (1. - 2.) 002 (6OM) (1S) 12N (3) (cm (134) la (191) ()I 62 (8) (116) (121) (41?)

8. Iterest paet orrars

6. Overall Ibelante (4. - 8.) 6 (6S2) (S13) UK (36) () (14) 13 (191) ()1 62 (39) (116) (121) (41?)

T. Plamm;*i I7.1. rt.rnel I

.1.S. iAPubic.1.2. PPrivet.

7.2. cOmetic7.2.1. 0.W.A. 1.2.. Caser.alf bnko I

0. Cmi_et ap Id 002 (620) (1O 126 (34) (On) (136) 1s (11) (US)1 62 (89) (116) (12) (41?)

9. Mt tre_ am (9.2 - 9.1 * .Z, 1.74 (60 430 124 831 (S2) M 13 2 (n) 0" 7 3 840 619.1 Troafer.e totheU..E. 0 0 0 0 0 0 0 0 0 01 0 0 0 0 09.2 Troader., fee tko U.ALL 591 0 613 0 426 0 400 0 477 01 got 6 42 460 470.8 Cowen" of amStoo logo" 0o (m) (14) 1 (3) (do) (1CM) 1i (19) (AI 02 (30) (116) (1) (417)

bNes(C) UN mae convertible beau.

- 97 -

~CMOUOATI09I 4. UTrILITIES CSU. 1

. OPAL. MAM Yesar 196 190 16 199 9w0 I 1966 lw 19 6 I"* 1900Caninho. de F rro de L. Unit(*) Ko. UN Keen. Ue0 Kaze. IS K(go. US60 KwSo. %= I in eurreit Kua (MItt14os)

1. 7Oel rovae (1,1. to 1.4.) 2,0 180 4.024 110 4,242 140 4.2" 19 4.167 1* I 2.7 * 4. 4,82 4,16 4.*29

1.1. Curret reavnue 1.144 18O 1,907 110 1,8011 140 1.92 1413 1.8 128 1,294 1,917 1,940 2St,O 1,781.1.1. Saton (a A S) 1.1a i 10 1,418 110 1.860 140 1,447 18 1.409 1 S 1.208 1.82S 1,601 1.6181 1,681.1.2. Other revenue 11 894 440 474 486 0 I1 894 440 474 410

1.2. Currant transfer. 1,410 0 2,217 0 2.4S4 0 2.8183 0 2,3= 0 1.48 2.217 2,484 2.18 2,3ZI1.2.1. from private neter 0 0 0 0 01.2.2. from pubiHc "ator 1,488 0 2,217 0 2.44 0 2.338 0 s.32 0 I 1.4 2,217 2.486 2,318 2,8ZI

1.2.2.1. )price 4qbeldleo I 0 0 0 0 01.2.2.2. otheer eabidlea 1,4a 2,217 2,484 2,818 2,35 I 1,1 0 2,217 28,44 2,t18 2a,32

1.2.3. from abreed * ° a ° °1.3 .CeoI%G *roenu 0 0 0 0 0 0 0 0 0 ° 0 0 0 0 0

I.3.1.coapitat transfers 0 0 0 0 0 0 0 0 0 ) 0 0 0 0 01.8.1.1. freo privet. Ge~ 0 0 0 0 01.3.1.2. fra public actor 0 0 0 0 0 0 0 0 ° 0 0 0 0 0

1.3.1.2.1. inve Casit fund 0 0 -. a a1.8.1.2.2. cea;it i, 0 0 0 0 0

1.3.1.3. free abroad b0 0 0 1.4. other reveueos a 0 0 0 0

2. Total exponditu.e A not lenidg 2,1I7 640 2.90 1*242 2.6 1.-SP 2,014 1.62 2SAW0 1.M I |.70 42,5 4.231 4.177 4.225

2.1. Currant Exnantd.turoe 2.137 489 2.90 66 2,926 675 2.014 GM 2.100 563I 2,67 ,6048 .600 8.871 3.4712.1.1. Oaerating oxpondituro 2.8 s 489 2,968 86u 2,921 s7t 2i "4 SW 2.0 GU 27 8,840 8.496 8.71 8,471

2.1.1.1. Perainel 294 s6 01 07 o2 94 600 90 624 901 S 796 7m SW 7152. 1.1.1.1. use" 294 66 641 68 OO so 6o n62 as No 7 712 6n 7072.1.1.1.2. Other o . 0 0 0 0i O O O O O2-1.1.1.3. Yochnical elsiet. 4 14 0 7 0 0a 0 4 14 7 0

2.1.1.2. 11teraadiasto Input 261 a2 t12 9 I 012 8 6 w7e 6 w I 6 1,211 11,0t0 1,1in2.1.1.2.1. R i rluele 2s 5 so 814 9 66 8 314 2 1 1s I NO 014 6 m 62.1.1.2.2. Otk. oodis 6 0 611 6as 61 u0o 41 61 460 70 1 S66 607 4e2 6662.1.1.2.3. Ot1e. 4 0 0 0 0 a 0 0 0° 4 0 0 0 a

2.1.1.8. Amrtixatian 1,6 26 1,68 7T 1,477 67a 160 91 1.52 as 1I,10 1OOD 1.665 1.6 1.62.1.2. tnteret pet 0 0 0 0 0 0 0 0 0 0 0 0 0 0

2S1.2.1. Finance Charge domea. 0 0 0 0 02.1.2.2. Pintomo ohargo fores 0 0 0 0 0

2.1.3. Curant trenofre 0 0 0 0 4 0 0 0 0 0 0 0 4 0 02.1.3.1. to privoto actor 0 0 0 0 02.1.3.2, to Central ternnit 0 a 0 0 4 a 0 0 0 0 0 0 4 O a2.1.92. 1. taxes 4 0 0 0 4 a O2.1.3.2.2. r*stante budget a 0 0 0 O2.1.3.2.8. msaIl tfd g 0 O O

2.1.3.3. to abrad i 0 0 0 02.2. Capital expenditure 0 g9 0 7n 0 702 0 Gm 0 786 1 20 67 7 0 76

2.2.1. Fixed capitol fe1aition 114 so 6 4 6641 114 86 69 1 62.2.2. Cepitei treaofer 0 0 0 0 0 a 0 0 0 0 0 0 0 0 O

2.2.2.1. to private eser 0 0 a O2.2.2.2. to Central onmst I 0 0 0 0 02.2.2.8. to abreed I 0 0 0 0 0

2.2.3 Other 98 0 la 0 s9 0 92 0 915 96 2 09 9O 2 91

8. Currant ,alalwe (I.1.- 2.1.) (96) (6)(I.170) (47 4)(1,lSt) (6) (06) (496)(1.060) (48nIW(1 ( )(1,SU)(1.Sl)(1496)

4. Opoertine iOlm.e (1. - 2.) 446 (40) 1,04 (1.2) 1.818 (1,217) 1,480 (1.220) 1,261 (1,192)! (66) (90) 10 191 69

S. Zntrert pqnt arreore

S. Overall balanco (4. - o.) 4M (4961) 1,042 (1,1 1,J18 (1.21?) 1,420 (1.226) 1,261 (1.192)l (88) (90) 101 191 69

7. Financing 7.1. external

7.1.1. Public I7.1.2. Private I

7.2. *Oetic I7.2.1. B.N.A.I7.2.2. Ca.mrele bank.

0. CANitenc chek 44MG (490) 1.042 (1.12 1.310 (1.217) 1,480 (1,.26) 1,261 (1,12)1 (65) (90) 101 19 6

9 #st t.aeo an3 (9.2 - 9.1 * 9.3) (g9 m 9)(1,176)(1.1#)(1,118)(1,n1) (098)(1,)(1,060)(1.12l141(87)(2,826)(2.112)(2.w)9.1 Trandrla 94 toe U..Me 1S,480 0 2.917 0 2.484 0 2.8w8 0 2.22 01 1463 2.217 2,466 2,818 2.3a9.2? T .or. from et j6UilG 0 0 0 0 4 0 0 0 0 0 I 0 0 4 0 09.s Coeveg of ooatitie tames 446 (40) 1,04 (1.1M 181U (1.2t1) 1.40 (11.6") 1.261 (C1..192 (CM) (90) 101 191 9

Note:(a) 668 ie oonvertible ICani

- 98 -

,~~~~~~~~~~~~~~~~~~~~

unit V e". UNams. 1 Earn. UN Now. 16 KWe.. us In eurreat lema.c

1. tal r, ( .1. to 1.4.) 11,447 21.T1 12.Ul0 81.0 14,235 88.81S 1,E8.0 6.9U1 #i.,1 80.450 183.,10 2 4.6 47.551 30,77 43.78

1.1. Curernt rmmua U."? 11.60t0 20.50F 14.253 80.64 12.6068 80.10 3.1 J0.4O6 1I2.13 42,1W 44.910 30,716 46,739.1.1. sales (a A6) 10.7 .6 I1.=39 19. 1.00 0.647 41.7000 1.920 I111811 U0.43 150427 41,104 4lf114, 44,384

1.1.1. other reIm 700 1l 118 1.0" 1.8W I 709 l 1.218 1.069 1.8W.2. Current tm r 0 0 0 0 0 0 0 0 0 01 0 0 0 0 01.1.11 tfra private sector 0 0 0 0 01,.2.2. vm subtle oeat 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0

D...1 ries auheidie. a 0 0 0 01.2.2.2. ote bA_ldi°o 0 0 0 0 0

1.2.2. fre abroa t 0 0 0 0 01.8. Caps.tol rvenu 0 0 0 0 0 0 a 0 0 01 0 0 0 0 0

1.L.a.. IO*teltrawed. 0 0 0 0 0 0 0 0 01 0 0 0 0, 01.8.1.1. from private sector 0 0 0 0 O1.3.1.2. fre eu Ie* 0o~ 0 0 0 0 0 0 0 01 0 0 0 0 0

1.S.1.1.1. Investment fund I 0 0 0 0 0l.8.1.l.Si enpital tere a 0 0 0 0 0

1.8..8. 8 free abroad I 0 0 0 0 01.4. 0th., rovenuas 4.05 1.699 1,64 1.6* 2,66 0 0

2. TteI expenditure A not lniln 10,73 10.186 1i8,11 19.91 12.9t2 24.51 18.860 31.911 10.010 010s 120.91? 35.446 37.1" 45.737 40.f21

2.1. Currnt _iuedlturoo 10.762 10.411, 166 18.8S6 12.2" .842 18.644 1.911 1007 60.56 10.164, 84.0 ".9 1.80 48.71, 40. 2.1.1. p.ratie expenditures 4,064 12.,01 4.116 11.986 2.066 17.017 1SIt 25,11 I 13 5.80? 116.94 17.114 19.1180 5.4M40 5.4

2.1.1.1. Pwreenol 2 5 774 21 62 176 80 1 1.186 18 . I.2 I 1.000 6OY 09 1,804 1.5292.1.1..1. We,. 213 8"0 1" n8o t1 40 174 *41 t8r aI 618 *ti 68 GM 7882.1.1.1.2. Otr rimn. so0 374 10 8m 18 so 14 6 I0 46" 8" s1 an 5 sw2.1.1.1.8. Teaheleal analt. 1 0 0 0 0 0

2.1.1.2. lIteradlet. Inut. 0 2.1a6 0 12.214 0 180,5 0 WS86 0 18.1O 122.180 11166, 10.50 1t.0W0 18.12.1.1.2.1. e mteriale e6.n *.001 18,86 9.463 10.at I .0 aon * 10.10 10.*48 tO13a.1.1.2.2. Other _oa" SA3Y6 2 .2at 8,"4 1.89 .162 1 a.,1 2.242 8.01i 1,6908.M9

2.1.1.2.8. Other 1.5 96 1.37 1,45 1.861116 I 1.036 o61 SAM 1.45 1.8661.1.1.8. teortleai 3,620 8,03 .76 10.46,1 0.1811 I M S..0 2.739 10.41, 9.136

2.1.2. laere. pepmte 0 3U2 0 762 0 06 0 0 0 236 5 512 M76 604 36 42.1.2.1. FiAn... aherge deme.. 0 0 0 02.1.2.2. Fleas" hreew fee 31 w 782 0486 104 a32 7ea S0 80

2.1 S. Current trafe awr 0.71 8.0S0 1U.406 4,780 10.06 4*,07 18,680 6,.8I 0,920 4,647 1 0.711 8r.10 14.61 5.04? 14811062.1.S.S. to private a* I 0 0 0 0 02.1.J.2. t Central Go,ernment 6.718 .0064 1.409 4.7,61002 4.69 1.6 3,6 9,2 4.441 9.7 1.14861 26.047 4.6680

2.1.8.2.1. toze 6.7 8 006 .406 4.70 10.003 4.670 18B 6,166 9.063 4.647 9.727 1.196 14,631 10,,047 14.8W2.....renitame budget 0 0 0 0

2.1.8.2.8. 1lie fud B 0 0 0 0 02.1.3.S. to abroad i 0 0 0 0 0

2.2. Cepitoloroen4iture, 0 173 0 1.407 0 1.6* 0 0 0 a 1 .?3 4 1.407 1.666 0 0

1.2.1. Piaf- anpfi teforatice 5 0 0 0 0 02.2.2. Capitol treufre 0 0 0 0 0 0 0 0 0 0i 0 0 0 0 0

12. I f;J evto private met 0 0 0 0 02.2.2.2. to Central Dovornom I, 0 0 a 0 02.2.2.8. to abrd t a 0 0 0 0

2.2.s. o. 1.734 1.47 I.1,3 I. 74 1,40 1.601 0 0

S Current Ibla. (1.1.- 2.1.) 66 1,13 (2.960)11.014 1.216 0.5 (O) 0,00 5.211 SliO1 1.t0 0.100 9.00 4,960 5,46t

4. Operatin ablon. (1. - 2.) 626 83.1i6 (21060)11.06 1.25 ,.016 (23) 6.00, S.2 t U I 4.246 .839 10,833t 4.0 6 ,401

S. Intoreot Poat arrero t

6. Overall balba.m (4. - t.) 6 8,8610 (1.960)11.87 . 0.065 (80) 6.00? t.S11 20 1 4.2460 089 10.3111 4.969 5.461

7.1m. ter" 7.1.1. Public 7.1.2. Private

7.2. besetlo

7.2.2. 0.0.4. I7.,.2 Cueea eb

- 99 -

*_ s Er A rS A (11.9.4 V" I

. Tetl eswen (1.1. to 1.4.) 661 401 4.2e4 8.1e ?.268 a.S, 7.92 9n 1.151 7.46 82.606 14.025 1.96

S.1. Current revwea. 78 491 461 8,18O MC 5.87 918 S.06 96o 5.9" 565 c.80 8.84 6.94 0.61.1.1. 6.).. (0} £5) 70 401 4"4 S.1M0 7 A."? 8 o.r s0o 8.* I 1 8.10 6.98 6e 6.761.1.2. Other oe f"ro we S as 1o 10 a a 8 e1 60

1.2. Current tmedfre 6 a 8.70 0 8.460 0 7.076 0 7,07 O m .7ea 0.40 ?.O 7.071.2.1. fra Drivet. eastor 0 0 0 0 01.2.2. firom ubIcl eatio. an 0 8.76 0 6.460 *o0 0 I 8 .760 s.460 .076 ?70.M

1-2.11A. pri@ .boldlew 0 0 0 0 01.2.2.2. other abesideo 5ea8 0 6.750 0 6.40 7.07Y 706 I 58S .70 0.460 7.076 7.076

1.2.3. fra abrd I 0 0 0 0 01.9. Caitarl rf e 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

181cuinwit.trenwef.r 0 0 0 0 0 0 0 0 0 01 0 0 0 0 01.8.1.1. fr? orivteeo east 0 0 I 0 0 0 0 01.3.1.2. from pbli ic .tOr 0 0 0 0 0 0 0 0 0 0 0 0 0

1.8.1.2.1. ;aveetamt fod 0 0 0 0 0 01.8.1.2.2. c"ital Os.ta... 0 0 0 0 0 0 0

1.3.1.3. froem brOd 0 0 O 0 0 0 01.4.Otk r0 eues 0 0 0 0 0 0

. Tot. espndttur. a lt lentO 1.976 G" S.610 2.073 4.W6 2.488 5.46 3iS,6 5.46B .8Is 2.601 5.6t 7,425 $.6, 0.6

2.1. Current Epadituvs. 1.976 6U4 3.610 1.94 4.9s 1.218 5.406f S.1 .4651 $S. 2.010 a.8 7.0 a0.60 8.0002.1.1. O.e.r.tie ese.dituree 1.910 691 8.35 1.010 4.866 6U 4.7*. 1.415 4.72 1.415 2.100 4.20 4.9607 8. 166 8.108

2.1.1.1. Peremal 1.076 on 1.6 6n 167 6n8 1 .6 89 S 1 8 I 2.31W 2.80? 2.56? 2.5V 2.272.1.1.1.1. woo" 1.67 167 I.6 18f .67 la 1.658 2a" 1.6 a"0 I1.6 I.66 1.662 2.040 2.0402.1.1.1.2. OCte ~.m 40r 406 40 44 44 r 900 94W 9 4e "2.1.1.1.3. Tio.cai aegist. 8 80 So 41 so so so 42 *

2.1.1.2. bot.readleteo i.te ZIA so I.5 8so 2.6 0 2.96 7 2. 7:1 I 868 1."96 2.80 $.88 8.6692.1.1.2.1. 2.fte sotaiel. 1a 29o so 190 S1.80 1.47 88 1.497 s 1 "0 1. 86 1.668 1.82.1.t.2.2. 0th.. 4ode. 0 8s 0 197 8se an I so 197 0 as6 86o2.1.1.2.5. Othor 11 0 170 0 1.84 1.486 1.46 11 770 1.514 1.486 1.4W0

2.1.1.3. £ertlgstbaa 0 0 0 0 0 0 0 0 02.1.2. ntestea pea't 0 S 0 17 0 81 0 8t 0 31 8 17 81 81 8

2.1.2.1. Fiaeao chape dame. 0 0 0 0 0 0 0 02.1.2.2. PiFeae chlar for.s 0 S 0 17 1 81 8 | 1 1 81 1

2.1.8. Curoent teontf.r. 87 141 87 96 M 1I.81 69 1A" 66 1.69 I 19t 1.27* 2.164 2.6 2.8622.1.3.1. to private veter I ° 0 0 0 02.1.3.2. to Costeal) Gov.aet 57 0 8O 0 0 6 0 6n 0 69a 01 57 870 80 6IS 6S

2.1.3.2.1. toes 0 8U 0 oso S0 5 5 85 60 657 6572.1.S.2.2. rmit_s"boAgte 0 0 a 0 0 0 0 0 0 02.1.8.2.3. smel fued a 0 t0 0 as 86 S 8 19 88 as 86

2.1.3.8. to abrotd 0 141 0 90 1,5U 1.6" 1.t 141 986 1.8U 1.6, 1.6"2.2. Capitol *eanditure 0 20 0 180 0 as3 0 244 0 34 1 28 no S22 244 2"

2.2.1. Flied cwitatl foretlsin 0 20 0 1u0 2211 *4 I 25 180 2 244 2s42.2.2. Colto treonfrs 0 0 0 0 0 0 0 0 0 0° 0 0 0 0 0

2.2.2.1. to private . 0 0 0 0 0 02,2.2.2. to Cetrol Osev t 0 0 0 0 0 0 02.2.2.S. to.br.d 0 0 et0 0 0 0 0

2.2.8.. ot0h0 0 0 0 0 0

8. Current B4oler. (1.1.- 2.1.) (1.960) 848)(C8.1IS) 1.136 (4.16) 8.2" (48, 2.666 (4.866) 2,762 I(O.245)(1.109) (l6)C1,66)(1.7

4. oeatitt Balasce (1. - 2.) (1.816) (4) S6 1,096 2,807 .071 3.8110 2.6"4 2.512 2.836 1(1.60 144 s,a79 8.112 8.00

8. Intereet eoieatt ir..

S. Overall bole.e (4. - 5.) (181) (6) 646 1.0 2.807 8.071 3.W 2.64 2.612 2.,65 1(1,.7) 1.7 .879 6.172 5.aS

7. FlmeeinI

7.1.1. Iabtte7.1.2. Pivete

7.2. Oo.eabiI7.2.1. 0.3.5.7.2.9. C_ainro.et bi.I

-100-

Name T A A (U.E.E.)Year I 1956 1967 1988 1969 190 tw196 190 198 1989 19011unt.k I asa. USO Knaa. 1SO KNam. ISO Kozo. 1S8 Kaae. we j in cu?PG4 Keamn"*

1. Total revernue (1.1. to 1.4.) 4,6602 1,897 5,18 525 5,074 .910 9.26? 1.094, 13.504 1,350 I 6,72 5,6U7 8,904 10.301 15,062

1.1 Curaft revenue 4,862 1, 647 5, 188 52 5,074 910 9,267 1,0914 13.504 1,86 I 6,72 5,57 5,9104 10,361 15,0621. 1.1. Sale. G (04 8 ) 4,802B S,188 5,074 9,267 18,.0 I 4,69 5,183 5,074 9,267 13,45041.1,2. othear reaetwoo 1.847 so910 1.094 .1,850 .1,84 305 910 1,094 1,855

1.2. Curreant trmnef1a.' 0 0 0 0 0 0 a 0 0 01 0 0 0 0 01.2.1. from privato sector I 0 0 0 0 01. 2.2. froe pub II aoccur 0 0 0 0 0 0 0 0 0 01 0 0 0 0 0

1.2.2.1. pric, a.,ba.daaa 0 0 0 0 01.2.2.2. other eubaid).o 0 0 0 0 0

1.2.3. free abroad 0 0 0 0 01.3. Covital "venue 0 0 0 0 0 0 0 0 0 01 0 0 0 0 0

1.3.1. Capital tranaforo 0 0 0 0 a 0 0 0 0 01 0 0 0 0 01.8.1.1. few. .riv,te neater I 0 0 0 0 01.3.1.2. froe PublicOaetep 0 0 0 0 0 0 0 0 0 Oj 0 0 0 0 0

1.3.1.2.1. investmet fvnd 0 0 0 0 01.3.1.2.2. capItal Increase I 0 0 0 0 0

1.3.1.8. fr abroaind 0 0 0 a 01.4, Othor, raoenvuaa 0 0 0 0 0

2. Total expendidture & noat leniding 8.849 8,647 2,880 8,86 2,519 5,851 2,017 3,474 38,72 6,726 6,996S 6,1" 6060 6,291 10,597

2.1. Current Esponditurue 2.592 3.566 2.544 8,492 2,406 8,481 2,514 3,401 8,144 4.666 6.1NO 6.066 5,667 5,918 7,7472.1.1. Oceinating @xgandltiiin 2.596 8,519 2,50 8,8551 2,81 8,546 2,475 8,296 2.712 4.074 I 6062 56.68 5,72 5.770 6,785

2.1.1.1. P.tao..t 1.190 481 1.366 426 1,262 839 124 SU1 950 190 I ,66 1, 781 1, 68 1,549 1,1782. 1. 1.1.1. Wagon 96 1,087 1.021 1,016 9 ".90 1,0517 1,021 1.016 9662.1.1.1.2. Other roe.,. 262 891 265 2 251 286 as8 801 1S0 O4 580 49 6SW 1902.1.1.1.8. Technical aggiat. 91 18 118 I 9 184 115 0 0

2.1.1.2. Intaruediata input, 1,835 2,690 1,206 2.55? 1, 181 2,627 1.266 2.6151 1,72 3.5658 4,048 8.742 3.74 3,044 5,802.1.1.2.1. Pau mntorieu 862 987 72 797 64? M2 746 019 621 1,6659 I1,600 I,M 1,869 1,564 2,2602.1.1.2.2. Othor geadas 292 1.75 809 1,740 86 1.908 181 1.7919 66 1,924 2,046 2,049 2.2115 2, 117 2,5622.1.1.2.8. Other. 16 169 121a 0 485 IV9 169 151 168 465

2.1.1.3. Awartasatben 39 89 41 0 877 801 a" 89 9 841 877 6012.1.2. Intereat pascenta 49 6O 36 135 85 11 89 105 488 5MO 110 170 146 145 9162

2.1.2.1. Financa chargs dome., 49 a6 3889 0 486 I 49 86 8 89 4882.1.2.2. Fin.,,.. charge fore 6a 185 118 0 185 82 6 188 115 106 at9

2.1.3. Curreattroae,foe.. 0 0 0 0 0 0 0 0 0 01 0 0 0 0 02.1.3.1. to private soater a 0 0 0 02.1.3.2. toCon,trol 84vareAwt 0 0 0 0 0 0 0 0 0 01 0 0 0 0 02.1.3.2. 1. taxes 0 0 0 0 02.1.3.2.2. reeltanca buwdget a 0 0 0 02.1.3.2.3. eoeiel fund a 0 0 0 0

2.1.3.8. to abroad I 0 0 0 0 412.2. Caoital eapenditur. 757 59 40 Ila11 70 80 78 7261,1 861 180 185 W76 2,602.2.1. Fieod capital forastien so 90 70 0 78 21,16 so5 90 70 78 1,862.2.2. Capital tro,afera 0 0 0 0 0 0 0 0 0 CI 0 0 0 0 02.2.2.1. to privateo e~tl 1 0 0 0 0 02.2.2.2. to Central Goevrnment 0 0 0 0 02.2.2.3. to abroad I 0 0 0 0 0

2.2.8. Other 7740 118 380 0 5so 757 40 118 808 600

3. Currant Balance (1.1.- 2.1.) 2,290 (1,741) 2,509 (2,9166) 2,6651 (2,8511) 6.75 (2,807)10,860 (3,048)1 849 (879) U17 4,446 7,815

4. Operating Osalnae (I. - 2.) 1,588 (1,800) 2,549 (8,060) 2,566(1 2,62) 6,480 (2,881) 9,6812 (5,167)1 (267) (809) (66) 4.069 4,466

S. intoroet pay.a.nt arresro I 0 0 0 0 0

6. Overall balance (4. - 5.) 1,6881 (1.600) 2,549 (8,056) 2,566 (2,621) 64840 (2,381) 9,68 (5,167)j (267 (509) (66) 4.069 4.466

7. Financing7.1, Extornal

7.1.1. Public7.1.2. PrivateI

7.2. 4aaat.icI7.2.1. 6.N.A. 7.2.2. Camrorlal beAnio

- 101 -

Hat. ^N c0N Ae V .e.e IYour I 1S0116 19 1o8 109 1990 I 166 190 "i 1909 l0

hWa J K,sa. USO Kwsa. Lw KzS. UNl Knaa. UN 01104. USS in current Koangowe

1. Total reoonue (1.1. to 1.4.) 1,231 64 3.007 119 1.425 08 1,040 159 1,711 111I 1,365 8.:21 1.500 1,1I9 1,2

1.1. Curret rovago 1.231 06 3,9 119 1.425 as 1, up040 1 .711 III 1 165 8,21? 1.500 11991 112Zl.S.l. Sales (8 & S) 1,321 04 1.9l 19 1.491 a 1.040 i 1,421 111 I 1.365 2.06 1.50l 1,199 .6321.1.2. Other ameue 1.15 200 0 1 0 1,159 0 0 290

1.2. Curle-nt tnor 0e 0 0 0 0 a 0 a 0 o 0 0 0 0 01.2.1. from private 0.at4r 0 0 0 0 01.2.2. *fre bilc..etew 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

1.2.2.1. price aubaidile 0 0 0 0 01.2.2.2. other ouabdo i 0 0 0 0 0

1.%.8. rt. ebrr4 I 0 0 0 0 01.3. Cgaital revyg 0 0 0 0 0 0 0 0 0 01 0 0 0 a 0

1.8.1. captiel troeef 0 0 0 0 0 0 0 0 0 0 0 0 0 0 01.5.1.1. *fre private .0.4.r a 0 0 0 0 01.8.1.2. few publot aector 0 0 0 0 0 0 0 0 0 01 0 0 0 0 0

1.8.1.2.1. IfWgatnve t fntd I 0 0 0 0 01.8.1.2.|. awitatl inree 1 0 0 0 0 0

1.5.1.3. from abroad 0 0 0 0 01.4. Oth,r rwvqee I 0 0 0 0 0

2. Total xependiture * not 10d.45 394 735 90 94 496 47 s70 61 59 020 I 1,130 1,952 1,343 988 1,415

2.1. Current Expenditureas 34 1T 40 40 A49 2 8r70 212 SU 31 n571 1,30 718 5s2 a762.1.1. Operating .apodlturea 894 176 96 408 A96 2 70 212 5 21 571 1.301 s1s8 5a 676

2.1.1.1. Peresonl 79 40 195 go 100 to t01 S0 1le 60 I 120 291 151 15l 1782. 1.1.1.1. Woo 70 0 1 0 l6 9B IIO 0 3 78 1w6 go 90 llS2.1.1.1.2. Other room. 0 1i I s6 0 19 0 21 1 0 I 1S ST to1 21 282.1.1.1.3. T.c.hnoul amiss. 1 20 4 62 2 s2 2 20 2 S? 27 6a wk 81 S9

2.1.1.2. ntoruadit. Inputs 31 1 765 =10 SU 1n 20 162 477 21 1 451 1,095 60 422 6W2.1.1.2.1. Ra ataeriala 241 114 896 270 308 143 212 112 U 1W 154 61 446 8" a602.1.1.2.2. Other ga 74 2a 1o 54 95 26 as 80 11O s8 I 96 24 121 as 142.1.1.2.3. 0the 0 0 0 0 0 0 0

2.1.1.8. Amrtlassten 0 0 0 0 0 0 02.1.2. Interea tp o n 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

2.1.2.1. Ploame ch,rJ dome. 0 0 0 0 02a.1.2.2. PIne Fi_ ubar for 0 0 0 0 0

2.1.8. Cret transfe" 0 0 0 0 0 0 0 0 0 0 0 0 0 0 02.1.3.1. to prive aat~ 0 0 0 0 02.1.8.2. to Cantralu nrrsat 0 0 0 0 0 0 0 0 0 0 0 0 0 0

2.1.3.2.1. te. I 0 0 02.1.8.2.2. ealtema budg0 0 02.1.8.2.3. alel f a 0 0 0 0 0

2.1.8.8. to abread 0 0 0 0 0 02.2. CpItal *aadituro 0 mg 0 U66 0 621 0 406 0 SU I 55 565 626 406 589

2.2.1. Fixed ewlitl forartoin 0 44 0 107 5 07 0 6 Is 44 107 SS 662.2.2. Caoitol trnatre 0 0 0 0 0 0 0 0 0 0a 0 0 0 0 0

2.2.2.1.t. private agater a 0 0 0 02.2.2.2. to Central ove noot I 0 0 0 0 02.2.2.3.t abroad I 0 0 0 0 0

2.2.3. Other 515 0 460 871 349 0 473 515 460 571 34 473

3. Current Balence (1.1.- 2.1.) we6 (42) 2,139 (109) 929 (19) 670 (a) 1,116 (169)1 794 1,831 7910 61t 946

4. Operating Balance (1. - 2.) 006 (6U5) 2,189 (O75) 929 (7) 670 (489) 1,116 (709)1 235 1,265 164 211 407

5. Intoret rayect ar-Mare

Overall bl. (4, - .) (651) 2,1*9 (M7) 2 (765) 60 (469) 1,116 (709)1 235 1,265 164 211 407

7. Plcnine7.1. Ent1onI

7.1.1. Public7.1.2. Private I

7.2. Oe,eotl 7.1.1. 0.N.A.7.2.2. Cgeralel& bae

- 102 -

I .

Yw, I 1t8 140 10 18 105 I 108 116 110 1 1"00unit IKa.. use G. usl Kws. 5 Em. Use Kom. tSEII In cure"i Ku....

1. 7e.0. rawsme (1.1. to 1.4.) 2,ZI8 185 29.0 t1 O.1 140 92.1 W8 29.07 UB I a.161 ,83 2.5 2.4 29.16

,.. cat "MO" 1.0m 8 1.0 I1o 1.0, 1 1.06 1i 1.010 19n I 1.0111 1.110 1.179 1,116 1.1181.1.1. S0.3. (a A S) 1,07 160 1.00 110 1.0W 140 I'm .o UV I*1ou 129 I 1.20 1.10 1.172 1.1 &.2101

Dow VOVWANO0 0 0 I 0 0 0 0 01.2. Cu_,UrIO t.a.t4SO 1.16 0 1.119 0 1,11 1.Om 0 low4 0 I1.21 1.17S 1.1t 1.1 1.141

1.9.1. from prtiva 0 0 0 01.9.2. Im pb#tc eI.. 1.10 0 1.17S 0 1191 0 .l36 0 1.140 0 I 1.8 1.15 1.11 1.10 1. 1

1.2.2.1. price 0id t I 0 0 0 0 01.9t.S2.2. Use.. .abeI.sdes 1.3 1.11 1.191 1.116 1.149 I 1.1415 1.173 1.19 1.08 1.140

1.2.1. from abroad I 0 0 0 0 OI.10. colal e.m... 0 0 0 0 0 0 0 0 0 0 3 0 0 0 0 0

1.1.1. eetel at4tom.r 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 01.8.1.1. from privaet -- Ie 0 0 0 0 0

1112teen wl la ma~ 0 a 0 0 0 0 0 0 0 01 0 0 0 0 01.8.1.. C e m t O O O Ot food O0 0 0 0 01.8.1.2.2. ;pl4.I e;ee 0 0 0 0 0

1.3.1.1. *from a4.ad 0 0 0 0 01.4. Other r..'m_ 0 0 0 0 0

9. Total .espedlto .r. St ledIl. 1.087 0 i.6 06 1o71 766 1.m s0o 0,7 67 2 ,a48 29.87 2.464 9.46 2.425

2.1. C.rMAe beeul4_;. 1.OW7 411 S1.7 10 1.71, 14 1T7 S0 1.70 8611 29240 2.174 2.099 2.174 2.1402.1.1. Operatiug .u..dt4r.. 1.678 411t1776 8 1.718 86 1.T77 0 1.710 S 2 9.940 2.174 2.000 2.174 2.140

2.1.1.1. p_ l t " 46 so 48 as 43 16 46 6 O4 6R U IN 1VA t1 12.1.1.1.1. woo" 46 s0 46 so 46 60 46 es 44 2 189 12 UK 12t 2.1. 9.0.S. .r . 0 0 0 0 0 0 0 0 02.1.1.1.1. tehnical _mid. a 0 0 0 0 0 0 0 0

2.1.1.2. lAt_ig dleti 921u1t 95 5 108 124 196 1S 0 114 190 Su a8 St 400 8t1 512.1.1.2.1. 11_ mte.rio 0 t 0 4 S 0 814 0 8U M 814 80 814 119.1.1.9.2. 08mm _ds 90 0 O58 0 1to O 0 19 28 S"11 9 102.1..2.9. 3_0mw 0 0 0 0 0 0 0 0| 0 0 0 0 0

s.1.1.J. A_ ttin.. i 1,8 0 0 1.0 0 1.417 1s* 0 1,51 0 I 1.05 1.M0 1,477 1.0 1.8122.9.2. 9.1at .. tpsm4 0 0 0 0 0 0 0 0 0 0O 0 0 0 0 0

9.1.2.1. Pius.. *..g. d ir m _. 0 0 0 0 09.1.2.2. Fil... dwwo. far 0 0 0 0 a

2.1.8.S. *sere" t.. . 0 0 0 0 0 a 0 0 O I 0 0 0 0 09.1.1.14. pt nO O O O O emO O O I 0 0 0 a 09.1.3.2.t.Cou,Goveramh.0 a 0 0 a 0 0 0 0 0 a 0 0 0 0 0

9..191.tes. 0 0 0 0 02.14.1.29. remit_... be" 0 0 0 0 02.1.8.2.1. aielo f_d 0 0 0 0 0

2.1.1.1. to brd 0 0 0 0 02.2. CapItoal O *a ditOrO 0 290 0 110 0 85 2 m * m 0W 116 894 282 m

2.9.1. Pised ,.0tSl fomtion 114 121 296 110 1o5 14 1 96 170 185.2.2. Cwthil _owfte a 0 0 0 0 0 a 0 0 0 0 0 0 0 09.2.2.1. t pr4w4to stor 0 0 0 0 09.2.2.2. 4. Cs...sl 0*..met 0 0 0 0 0

2.2.29.. tob..d 0 0 0 0 02.2.0. O16er 0 16 a so 0 0 91 1s 98 0 C2 f1

S. Cuffe" Ouism.4 (1.1.- 2.1.) (7P (CM1) (OM 7) (08) (944) (78 (984) (616) (01(.026) (64) (08) (9) (105)

4. Opueratlg Bl... Cl. - 2.) 401 (470) 47? (401) 421 () 4180 (M) 41U (4)I (70) (4) (1) (08) (04)

S. 1*,teet puguamt Oft...

S. Ovetol I b.l..ce (4. - B.) 461 (470) 477 (451) 40 ()i 45 (M) 45 (5) (70) (4) (19t) (a8) (04)

T. Pi.eeIao7.1. bter"I

I.1.1. PubliI7.1.9. Pr.vbo

7.2. o.mtI. 1.2.1. 0.1.A. I71.9.8 Cms..oIl b.4boI

4 ~ .,.

- 103-

I~ ~~ I

, a um (U O.S, Itear I 1060 1"? 1908 IOS 1 I 10 1*0 18 19,. 1990un~it U Kia. UNS wo. KaRe. Ib Raoe. up KaWX. we In aeueest Ittna

1. Total cmae, (1.1. to 1.4.) 1.480 to I.4" 238 1.1 16 1.W 16 1.8 UsI J.m7 I'e 106 1.401 1.8 1.01*

.1. Cwrat, ceme 1.40 1tO 1.04 211.0 US I.W U 11.31 SS I1. 1.2S0 1.401 1.89t 1.619

14.1. tales (a & 8) 1.400 MO 1.014 , 1.189 12 1.=9 268 1.018 86 1.00 1.217 1.891 1.891 1.e61.1..0W. ohe rreyeae so t10 so so S 2 1 0 0 @3 89 80 10 2 0

1.2. Owrrma truaor 0 0 0 0 0 0 0 .4 0 0a 0 0 0 0 01.2.1. frau private O~ 0 0 0 0

1.2.2. frm public atr 0 0 0 0 0 0 0 0 01 0 0 0 0 01.2.1.1. *ree obIioae O O 0 0 0 0 a

1.2.2.2. ewOe b14d0 0 0 0 0

1.2.8. om ab,r d 0 0 0 0 0

I.S. Caitel revaa, 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

1.8.1. Cattol trofera 0 0 0 0 0 0 0 0 0 0a 0 0 0 0 0

1.3.1.1. tfrm prive eate 0 0 0 0 0

1.8.1.. from .gblea sctor 0 0 0 0 0 0 0 0 0 01 0 0 0 0 01.8.1.2.1. tmaetoa fund I 0 0 0 0 01.8.1.2.2. mits remao 0 0 0 0 0

1.8.1.8. *fro abroad 0 0 0 0 0

1.4. Sabw roveao9 0 0 0 0 0

2. 'ot easoaditur.e a Mt lending $7 470 U 18 7 7 170 8 14 17 1r 1.u 97 941 S 64

2.1. Care"e epedituroo 071 470 7M 18 706 170 o7 14 on 18 1.8 978 w m 786

2.1.1. berting .aeanditureao On A70 198 7 170 8o 148 066 Ut i.3 *7 07 7082.1.1.1. P ol .L 87 2 8n 198 465 17 40 149 us 1311 71 4t4 am S 0 7

was"11.Voe SYS M US 198 408 170 407 140 VD 2181.9 78 744 064 07 8072.1.1.1.2. Other r_m. 0 0 0 0 0

2.1.1.1.8. Ta"l ei asieb. 0 0 0 0 0

2.1.1.2. toerudiat inset m 2W oft 0 108 a 0 0 U4 0 47O 191 la9 2 4 U

2.1.1.2.1. bew materials 17 1a n 14 u2 S " 11 to S4 1722.1.1.2.2. Coer goo" 08 IT 8 rr 0 lea 8I 48 so as2.1.1.2.8.So r 7 0 08 19 10 4 32 418 g1 10 4

2.1.1.8. Am Wtiaati 48 48 a8 88 40 40 1 0 S aB 40 46

.1.2.Zntora pae t 0 0 0 0 0 0 0 0 0 0 0 0 0 0

2.1.2.1. Plases _oe6 4mg. 0 0 0 0 0

2.1.1.2. Please aoarg fFa_ 0 0 0 0 a2.1.8. oaro.t treaefo 0 0 0 0 0 0 0 a 0 01 0 0 0 0 0

t.o.10 privaeo tter a 0 0 0 0:2.1.8.2to Ces _ albwrwmt 0 0 0 0 0 0 0 0 0 0o 0 0 0 0 0

2.1.8.2.1. toue. 0 0 0 0 0

2.1.8.2.2. ltrsmso budo9 0 0 0 0 0

2.1.8.2.8. aoile fnd 0 0 0 0 0

2.1.3.8. 0. abroad2.2. Cooei1t easdtu 0 0 0 0 de 0 a 0 a 0 0 0 0 so 62

2.2.1. FPxed cwaitl frmation 0 a at 4 a 0 0 61 as 402.12. 1clt ol trOero 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

2.2.2.1.0t pevate motse 0 0 0 0 02.2.2.2. to Ce_rl Govermenst 0 0 0 0 02.2.2.8. to ebroad 9 0 0 0 0 0

2.2.8. other 0 0 0 0 0

S. COurren Beane (1.1.- 2.1.) on (1) m 1 489 94 666 11a8 66 171 90 8 US 1 71 m .o

4. Operateno lonco (1. - 2.) 87 (181) 2 go 89 8 69 110 0 172 1 SW 81 401 710 970

5. Interest rapeast erreor. I 0 0 0 0 0

0. Ovrogll boVine. (4. - 8.) 801 (1011) MO I 89? 0 69N 11e 79 172 86 SUS 401 710 970

7. Plamin I ° ° ° ° °7.1. ab_t1l I 0 0 0 0 0

7.1.1. PwbUc I 0 0 0 0 0

r .1.2. Private I 0 0 0 0 07.1.6 . 9 0 0 0 0 0

7.2.1. 0.60.4. 9 ~~ ~~ ~~ ~~ ~~~~~~~~~~~~0 0 0 0 07.2.2. C |eiael beak. 0 0 0 0 0

-104-

Na..: 6.Mr.6.A. (U.S.!.) i IY..r I 6low tw1 t96e 199 190 I 196 190 1906 1 199 1990Uit Kum. Mi ft=. Ui K.m .UN Kw Kgws. US8 I in cuerrnt NIn.to

1. Ttal r"ewe (1.1. te 1.4.) 391 0 1.288 0 1.24 O an 0 lOI 0 391 1.16 1.249 0s 1OU

1.1. currcn reveate s3t 0 1,=8 0 1.29 0 on a8 1.0o6 a0I 1.58 1.24 "a 1.0601.1.1. .Saes (0a S) 381 1.,8 1.211 868 10*" s 801 15I. 1,249 068 1,0061.1.2. Other ra..... so so 0 0 0 0

l.2. carret Oramere 0 0 0 0 0 0 00 01 0 0 a 0 01.2.1. from priwaeta aectr I 0 0 0 0 01.2.2. fron 0ublboace0 0 0 0 0 0 0 0 0 01 0 0 0 0 0

1.2.8.1. price aubeidieo g 0 0 0 O1.2.2.2. ether subsidies 0 0 0 0 0

1.2.8. frm rd 0 0 0 0 0I.8. CseeWflr.vaaA 0 a 0 0 0 0 0 a 0 a 0 0 0 0 0

1.3.1.Caltaltr.fa.o .eo 0 0 0 0 0 0 0 0 0 0 0 0 0 a 01.3.1.1. free private saator * O O 0 01.3.2. from pbl la esr O 0 0 0 0 0 0 a 0 0° 0 0 0 0 0

*.9.1.8.1. imnvtenO *und t 0 0 0 0 01.8.1.2.2. casltal lcro. 0 0 0 0 0

1.3.1.3. fr abroad 00 0 0 01.4. Other revnwo I 0 0 0 0

2. Totale ue,ndltur &notl.ndlna 10 a 224 0 1ag 0 260 0 210 0 16 Y14 168 260 218*.1. Curremib xpenditur.. 166 0 198 0 16g 0 20 0 216 0 I 18 924 188 280 216

2.1.1. Opera"tn expenditurs 414 0 214 0 104 0 245 0 on 0 I1 214 164 245 2092.1.1.1. Parenl 144 0 1ie 0 1n a 1i6 0 O8 0 1I"4 196 1 to2 1i8

2.1.1.1.1. Va. 144 196 1ti 1I6 1 144 1I6 1in 121 186:.1.1.1.2. other roana 0 0 0 0 0

2.1.1.1.3. Thile io _;t. a 0 0 0 02,1.1.2. bIntatrcdiat lneut 0 0 18 0 11 0 to 0 sO 0 0 Ul 11 s 80

2.1.1.2.1. ie materiels so 29 0 0 0 so 29.1.1.2l.2. Other Goo 17 6 0 0 0 17 e

2.1.1.2.8. Othw is is to 16 0 10 1l 19 162.1.1.3. Awtisatim,n 0 0 0 0 0

2.1.:2.?nteaateo Ou,t. 0 0 0 0 0 0 2 0 I 0 0 0 0 2 12.1.2.1. Fina. chs diamnd.. 0 0 0 0 02.1.2.2. PIn..m. cmrgp fare" 0 0 0 0 0

2.1.2. Currt trwtfor 24 0 tO 0 1 0 9 0 7 01 24 10 S 9 72.1.8.1. ts prive sector 0 0 0 0 02.1.3.2. to Ccttrol o,en.mn 24 0 10 0 1 0 9 0 7 0 26 tO I * ,

2.1.8.2.1. taxes 24 10 1 9 7 I 24 10 1 9 72.1.3.2.2. rei_tan budgt 0 0 0 0 02.1.8.2.8. scial fund 0 0 0 0 0

2.13.8. to abrd I 0 0 0 0 02.2. Capital eenditure 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

2.2.1. Flsed caItal feoration 0 0 0 0 02.2.2. Cap;itl tranae 0 0 0 0 0 0 0 0 0 0) 0 0 0 0 0

2.2.2.1. to prlte oet 0 0 0 0 02.2.2.2. to Central Omeumt 0 0 0 0 02.2.2.8.t. abroad 0 0 0 0 0

2.2.8. other 0 0 0 0

3. Currnt Bblanc. (1.1.- 2.1.) 22 0 1.061 0 1.06 0 40 0 BO 0 I 1 .Ot 1.084 408 60

4. Operatin belnce (I. - 2.) 196 0 1.061 0 10." 0 4 0 0 m 01 5 1.061 1.06O4 408 6ao

ti. nt4et e t rear0 0 0 0 0

U. Overa"l alom. (4. - 8.) 219 0 1.061 0 1.0O6 0 406 0 06 0 2B5 1.061 1.004 405 G0

7. Pinenno I 0 0 0 0 07.1. etral I 0 0 0 0 0

.1.1. Public I 0 0 0 0 07.1.2. PrIest I 0 0 0 0 0

?.2. ie;mebe I0 0 0 07.2.1. O.S.A. I0 0 0 07.2.2. CGpmial bo. 0 0 0 0 0

- 105-

bg 6.Ni.g. (U.S.!.) t tV". I 19w6 1967 1i 1 9 9 1990 1 9 1S 1 10

Ur~it I bggb. 186 iW. 6UN ba. U6 goa. UfA teb.. Ull t Is . ae

1. TetIe "rw (1.1. Co 1.4.) 0 0 90 0 1.440 0 1.17 0 1.197 0 0 60 1,440 1.171 1.19?

1.1. Currant revenge 0 0 M0 0 1 0 61 0 S67 0 0 SO? 861 61 671.l.1. Sel.(a a 0 ) in 1 160o 01 0 1S 171 in 160l.t.2. CIba, revas 84410 460 4i6 0 0 840 410 40 40

1.2. Curreat twdate., 0 0 472 a d 0 WV 0 nO 0 I 0 472 0 669 8001.2.1. frm priest et. 0 0 0 0 01.2.2. from pbl, agte? 0 0 472 0 an 0 an9 0 so 0 0 412 6 6o 6

1.2.2.1. price . 4l.e 0 0 0 0 01.2.2.2. other avb.Adia 472 6s 6ee 6ao 0 472 G6

1.2.S. fm abroad 1.3C. Capital reve 0 0 0 0 0 0 0 0 0 0 0 0 0 0

.31ca.ItAel trotofo 0 0 0 0 0 0 0 0 0 0 1.8.1.1. free p.ivalwo atoe0 0 0 0

.8.1.. frombllA ter 0 0 0 0 0 0 0 0 0 0 0 0 0 0 01.3.1.2.1. ete f*n I 0 0 0 0 01.8.1.2.21. eagotl Increase 0 0 0 0

1.3.1.8. fr*broad 0 0 0 0 1.4. Oth revenues

2. T@tl ea.altero 4 at lndile 0 l0;a 6 612 an1 82 84 a's o61 0 1.2i4 1.211 1.90 1,207

2.1. Currqnt tapendltue.e 0 0 68 in a0 14 84 tS 1 1 I 0 76 9 as 72.1.1. Operatinga ouIen$tur' 0 0 62 I5 677 146 84 122 61 3i I 0 7 mOB a6n 756

2.1.1.1. Poroeo 0 0 20 0 241 0 200 0 0a1 0 2 241 2CO 2102.1.1.1.1. Woods 2 41 20 200 I 0 241 200 2202.11,1,^.2. 0th., ra.. I 0 0 0 0 02.1.1.1.3. To"hoiol o ais t. I 0 0 ° 0 0

2.1.1.2. Zter ote lew O0 462 so 4a8 e0 t84 6t 401 7m 0 o 88 4792*.1.1.2.1. Raw mte,Iel. 176 Ur? 18 168a 01 0 17o 1 In 1652.1.1.2.2. _thecomade 254 65 266 90 O ti e o 266 76 0 6 2O4 8142.1.1.2.6. 0th. I 0 0 0 0 0

2.1.1.8. rtI zSOA imatia so O 61 0 8 I 0 so IS 62.S.2. Intervoat 0 a 0 0 0 0 0 0 0 0 0° 0

2.1.2.1. Plnanee, chrev duo... a 0 0 0 02.1.2.2. FineIc. SOMPSo4- 0 0 0 0 0

2.A.S. Curren traenfers 0 0 0 0 4 0 00 0 0 0 0 4 O 02.1.8.1. to private oe a 0 0 0 0 02.1.8.2. to Centralbor'mmt 0 0 0 0 4 0 0 0 0 0 0

2.1.8.2.1. t.s,e 4 I 0 0 4 0 02.18.2.2. r_ltane hudet 0 0 0 0 02.1.8.2.8. cecIel fund 0 0 0 0 0

2.1.8.3. to ebred 0 0 0 0 02.2. Capital eapaniture a 0 0 477 0 Sl# 0 494 41 0 4n7 494 481

2.2.1. FPied caitel f loN 47 862 494 401 3 0 477 t 6 49 452.2.2. Capitaltrouafar 0 0 0 0 0 0 0 0

2.2.2.1. to rila ae I 0 0 0 0 02.2.2.2. to Ccntral GanO Ot 0 0 0 02.2.2.3. to abod I 0 0 0 0

2.2.S. Oth 0 0 0 0 0

8. Current Balance (1.1.- 2.1.) 0 0 (144) (186) (160) (8) 77 (1 ( () I 0 () (90) (45) (189)

4. Ooerating blanc. (1. - 2.) 0 0 820 (611) 7( (820) tS (616) 5t7 (a6m)1 0 (264) 2. 21 (10)

5. Iateres pwmntt lrre4ee

6. O"eal bala (4. (618) 87 (8no) 0 (206) 2 9) 21 (10)

7. Ptwc;in..... I7.1. Estornl

7.1.1. tAblic7.1.2. Private

7.2. Omaseto7.2.1. O.t.A.r.a.2. Camorclol bake

cm ct) s CO o l(A N to m u) o " (m V vu) vst 1joI *Vasw V*tg-

(us CW Coo) (Ws a Is) sot0 (itsCP) as ("V) in (9*) VW lOS) US C - t) '0 a e*-*" 9

ws (INTO (W5) O to a lIst9) tv MU a ("V) tn (WS) so (m) as (1' -vt) sel ,

o 0 a 0 0 Iism 's's'

O 0 0 0 0 OPu. O I Wt

o * 0 0 o 0 0 0 0 0 0 0 , I*1 d59 l 353ft 3wg

* 0 0 0 0 j90* e Osaj' O '"

3 0 0 0 0 10 0 0 0 0 O 0 0 0 00I40 *z-

0 go 0 0 0 * _ 0 0e-e-'t

o 0 0 0 0 ia _eu - ' t*Z

u" oft Ws us I O tee W NW an ut a- C t'1 :'s

n* so SW so to I o t0 1 oft 0 OSw S o 00 o53 5WMUS W *_ *55 t5*

o 0 0 0 0 1 JSS eA . e t v

us so us on no I o UP 0 Ns 0 NW 0 a 5 t s *johok" 4 .IT'.

* 0 0 0 0 I A#0d5 Oia Osmmid *s'3'Sl

o 0 * 0 0 I emm" J3an sinmgd *;*3*1*o o0 0 0 10 0 0 0 0 * 0 0 *rowlwwlll'o 0 0 0 Ufust,dw * _1 *

0 0 0 O O I Ous O O O a_ *5

3 0 0 0 0 I _m t'

got VtW A& us an Du ao * 0 sA& 0 us 0 uW 0 .s'IZ .,090q '31.1

* ! 0 * "two to mlg4w_ ', ,-5'V

00 0 0 O .1 _ o MM t?

Go 01 aa wa a s t- t

a at S W t 10 a 0 a 0 a 0 # 0 so 1-3 *t-T-tW

W see us us us I sol a mte a st uB *0 at us a 1O_ ts.aeet 't g5

g3- SW s at ts't ut us us Us a.t us usB SM eu9 us_ osu e ,*Jl t

SW'I MIt hA IST'S s9'1 I s u i go At Ws us tW m 1 Su0.1ppm IS o II's

0 0 0 0 0 Ioo O O I

* 0 0 0 0 I peaqa UinJ .5.5

0 0 0 0 0 P auNa g90amio" '5''V511,

00 0 0 0 0 0 0 0 0 0 0 0 0" I1 M#9t21

o 0 0 0 S I -no" s-ad . lt

0 0 0 0 0 10 0 0 0 0 0 0 0* mSJODOWO 1"Iopt'rs'10 0 0 0 0 100 0 0 0 0 0 0 0 * 0 0 0 0 I SW# ~ It's's

0 0 0 0 0 I 0p tos .5.55.19

O 0 0 0 0 I -a1tasom t t

0 0 0 0 0 10 0 0 0 0 00 0 O O Ort

0 0 0 0 0 AD" ""id swJ *t191t

O 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0

0 0 0* a a9 00OM J-eo WO AM tW MI tAs' I so s I" t ar' t (A O) en.s Ist'-:0 A TO ' sm's I @ mte * as e 0 tooS 0 Mts' wt emobJ our It's

0 AD tf SlWt't OMI'T I 0 Ow 0 It a "1" 0 OMT (t't 0* '1't ono OA 'v

SW *55 to i' ot Ig o 51 "* as *l :s o s ort 0 us': C's' S .et ) *S&J ,5j

our" stoi a o Om -mm W -saw m .0Uq an sw on 'mm" I smnsst e: MT Mt wetI wn ot M3*t Mt *bU I A*A

I (-1tU 1VA M V U

_ _ _ _ _ _ _ _-__ ,_ I,

- YUI -

-107

slw CA Aa LWAL)I

l.oa I 11W 19 111 two 116 11W 115 164Ihlt Em.t. Uli Iui. US Ilest. USS t. UIS Ibm. 9*0 I s mFcres Kesa

opith I ftm. m %M. yo I to warraR . _ .

1. TotFl rt_lte (1.X. ale 14. 02 04 an so 4 so1 M0 tII 1018 0 *O 41

1.1. Cet.at teua~ao O 0 0 11 1 M 6 7 06 0 1.O 67 6t 7t.l.9. W"r _ a ^ 04 <^ e " " | o 'M M an n t1.1.2. oSao. (5 11 o0( o M o oo 0 1o o 6 o i

1..w00,easmtere0 0 0 0 0 0a 0 0 0 0 01.2.1. tem Ptriate e"tV 0 0 0 ° 01.2.2. fro 04bl0m0 0 O 0 0 0 0 0 0 0 O 0 0 0 0

1.2.2.1. pc.rice esidle 0 0 0 0.2.2.2. ot h$de4. I 00 0

1.9.8. * es bd 0 00 0I.8.Cetta,reso 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

8.1a.CPitaI t.mf 0 0 0 0 0 0 0 0 0 0 0 0 0 0 01.8.1.1. fees o riea e I 0O0 0 0 01.S.1.2. fr public 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

1.8.1.2.1. taweobmt fed 00 01.8.1.2.1. .a.,a iaWeue I 0 0 1.8.1.8. fees trad 9 0 0 0 0 0

2.4. 0thr r _e . 0 0 0 0 0

a. (.l egeaditoure & met teadi06 6 laS W 91 ON 0 960 et1 7M

2.1. Ca t Epedbt 0 0 tI o60 1W 140 6 91 60 1M 0 0 s6t 7 62.1.1. Oseretin_lexeewitur0 0 M 1I S6 91 61 to I 0 o0 GU 76 6152.1.1.1. Pecse.l 0 0 to 70 St 75 20 40 as I9) 0 1* O8 78 Qs

2.1..1.. t so Is a1 of as 40 2B I 0 97 Is 04 IS2.1.1.1.2. OShr _o. I. 0 0 0 0 02.1.1.1.8. Tdiaertl miob. n* 0 0 I 0 1 6 e 0

In..2 termediate Ifpte 0b0 0 0 No 48 on0 0 674 18s 0 we6 8so60 2.. a2. w . materials* 9 481u 010M 01a 797 461 610 M

s.s.s.a. 2%0 ooe o 0 6 0 i1 0 8 42 0 102.1.1.2.a. Or s an - 01 0 Be 40 M an

2.1.1.8. ltu i Aetie.l IS IS 43 0 so9 0 I IS 42 IS2.S.1. a0reto"bpeyouw. 0 0 0 0 01 0 0 0 0 0

2.1.9.1. FIam.e 4hace ~. I 0 0 0 0 02.19.2 Pnes. iero ore. a 0 0 0

2.L,8. W.restr m_ _r 0 0 0 0 0 0 0 0 0 01 0 0 0 0 02.1..1.. to Drti I 0 0 0 0 0S..8.2. t CAR#i. nt 0 0 0 00 0 0 0 0 0 0 0 0 0 0

2.1.8.2.1. lazes I 0 0 0 0 02.1.8.2.2. eutee budae I 0 0 0 0 02.1.8.2.8. oeial fm I 0 0 0 0 0

1.1.8.0. ireefi I 0 0 0 0 02.2. Cmpftal OMPOMMOVe 0 0 0 0 0 0 0 0 0

2.2.1. Fiumd eOeiti fetles I 0 0 02.2.2. Ce0.el _ ef.re 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

2.2.9.1.. p ivefle I * 0 0 0 02.2.9.3. to c4atru qo"fmt I 0 0 0 02.2.2..to. sabrad 0 0 0 0

2.2.8. OtGer 0 0 0 0 0

Curret bIns.. (1.1.- 2.1.) 0 0 () ow (48) 4 (am 6 4 I 0 S i

4. er.s; zbA. (S. - 2.) 0 0e ( (s6< 4 (M 4 (47) I 0 ()

S. jatereet pepet 4artero I

. Overot beles 4. - 8.) 0 0() S (417) 4W (0) 664 ( 6O7) 66 I 0 aS to so COG)

7.1. EzeIa I7.S.1. Pbilte7.1.2. PrIvte

7.2. Ow..I)?.*.S. S.M.A.7.2.2. Cince_.l be. I

- 108 -

10e a P0SCA"00LA B AYear S W?68 1 198 196 1990 | 1906 190t 1900 16 190UVal ote. use t4,. 8*8 Kwom. U90 Koga. UN* K.eo. Us I curreont tNoan

1. Tetal revenue (1.. to 1.4.) 0 0 4 9 87n W2 48 585 6? 46 AsI 0 469 41? 3 Ws

1.1. Current reues 0 0 480 18 872 48 561 6? 464 42 I 0 460 418 682 S06.1.1. Isle (a A 8) 480 13 8t9 48 S60 6? 481 42 B 0 489 41? 628 503

1.1.2. Othre venueo 0 9 a o 0 a 0 9 31.2. Currant trofr 0 0 0 9 01 0 0 0 0 0

1.2.1. from prlvate e*ata B 0 0 0 0 01.2.2. fr pubtle ta 0 0 0 0 0 0 0 0 01 0 0 0 0 0

1.2.2.1. price su.bo lea ,0 0 a 0 01.2.2.2. other ssidies I 0 o 0 0 0

t.2.3. frm abroad B 0 0 0 01. Capital t e vOm 0 0 0 0 0 0 0 0 0 01 0 0 a a 0

c..1oatalttranef.re 0 0 0 0 0 0 0 0 01 0 0 0 0 a1....from private aectar a 0 0 0 01....rq.publl la ater 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0

1.....lvsvtmat fendI 0 0 0 0 01.....capital .naeeee B 0 a 0 0 a

1.3.1.3. ft. arbad I O 0 0 0 01.4. Other rvewei 0 0 0 0 0

2. Tetel ouendltura A not lndWin 0 0 88 8 30 1t0 4? 10 411 100 B 0 46 468 594 514

2.1. Curret £Eondldtaro 0 0 an8 9 8t0 10i 46? 10? 411 106 B 0 488 484 594 8142.1.1. operatIng oeanitpa 0 0 60 98 360 106 46 62 a84 8a 1 0 425 468 S2 473

2.1.1.1. Personal 0 0 44 41 4? 2 12i 1 72 sa a o $ 74 1tZ 952.1.1.1.1. ebo 44 4? 1 128 0 72 0 a 44 48 1 722.1.1.1.2. Othr . O0 0O 0 0 0 0 02.1.1.1.8. eItcleantl esIat. 41 2e 1 0 2S I 0 41 26 1 23

2.1.1.2. Znte_eWeei Inge 0 0 0 22 O we 18 an2 12B 0 255 Us4 352 8282.1.1.2.1. Ra cerllo 21 S8 2 2 e00 1S 21 1t | 0 211 2 214 222.1.1.2.2. Jther 9ida SW as 0 o 0 ay 0 0 122.1.1.2.3. outer as 78 t 9 a 0 aI 0 sO 75 1o88 s

.1.1.3. Attestts so 1 as 1 40 1 as a 8 is 48 542.31.2. InteraatPalo*"" 0 0 0 0 0 0 0 48 0 1is 0 0 0 48 1i

2.1.2.1. Pt'et_ ehorea de,. 0 aI 0 0 0 0 08.1.Y.2. t|FIAeS arge fW4IX 48 0 isl a 0 0 48 is

*.I.8, Curreit tres.f., 0 a 0 a? 0 0 0 28 0 1 01 0 a? a 28 272t.1.8.1.98 f prIvatO sOater 0 a 0 0 0 02.1.3.2. toCet rlgaoeroamt 0 0 8 0 0 0 2 0 0 2? a 0 Al 0 28 2?

2.1.8.2.1. fa"o 8y 28 ? 0 I 0 a? 0 28 272.1.8.2.2. resitenc budoet 0 0 0 0 02.1.8.2.8. eesila fund 0 0 0 0 0

2.1.8.3. to br<oaXd a 0 0 0 02.2. Caitel epo1twter, 0 0 0 0 0 0 0 0 0 01 0 c 0 0 0

2.2.1. Plxad aPitatl e * * o 0 a2.2.2. Capitalt..naere 0 0 0 0 0 0 0 0 0 0o 0 0 0 0 0

2.2.2.1. t private eS 0 0 0 0 02.2.2.2. to Centrl Casernet 0 0 0 0 02.2.2.9. ta abroW 0 0 0 0 0

2.2.3. her I 0 0 0 0

S. Curtit belwnc (1.1.- 2.1.) 0 0 71 (So 2 (61) 7n (40) Ul (2) 0 (14) (49) 80 (6)

4. Operatin balc. (1. - 2.) 0 0 71 (an 12 (61) 77 (40) 88 (62)I 0 (14) (46) 88 (6)

5. Interea pajat arrears,

S. "erallI baleos (4. - 5.) 0 0 71 (08) 12 (61) 7? (40) 68 (621 0 (14) (49) 38 (8)

7. Flemmeing 7.1. berel I

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I.Total awwiao (IA.1.to1.4.) 0 0 470 0 299 4 0 490 0 '2 1 0 416 9.. '2 42

I,1. Crr.ntg.revenue 0 0 1in 0 101 0 110 0 125 01 0 18 10 18 1.21.1.1. saes. (ab 8 ) 101 10 %12 1to 0 1.01 is 129 021.1.2. 0their reve.o 66 96 to 29 0 as o 24

1.2. Current oremyfer, 0 0 361 0 196 0 302 0 294 a0I 0 3R1 196 3M 2941.2.1, frog urivlto seater 0 0 0 0 01.2.2. froam ogablla cast. 0 0 aft 0 190 0 so2 0 294 0a 0 SU1 196 SU2 2914

1.2.24. price eubtidle. , 0 0 0 0 01.2.2.2. othhor auMidjee 1UI' on I" o VA x9* SU 294

1.2.3. fre oebrod I 0 0 0 0 01.3. Copital reuteu 0 0 0 0 0 0 0 0 0 0

1.3.1. Caotteltre.dere 0 0 0 0 0 0 0 0 0 0a 0 0 0 0 01.3.1.1. free prlivete eeoo I 00 0 0 a1. 3.1-2. fromaub IIa motor 0a 0 a 0 0 0 a1 00 0 0 0

1.3.1.2.1. investment fund 0a 0a1.3.1.2.2. apitel inoraoeg 0 0 0 0

1....from abroad I 0 0 0 0 01.. th.', reveto.eI 0 0 0 0 0

2. Tout. expe"itiiro A ne t oie.hg 0 0 27 so NY7 s0 266 8? no 2 0 MO6 2117 242 2012.1. Curpoet SePORditurse 0 0 278 4 267 14 2m 7 gm6 a 0 =29 21 242 26

2.1.1. 0.eratlf ng eueditwu. a 0 2Vs 4 267 14 218 7 260 S I 0 no6 SU1 24 262 Pe11.'rsonal 0 0 14 4 12V 14 120 in12 a I 0 140 141 184 141

2.1. 1.1.1Z. Mug. IN 173 1in 0 1 0 148 127 0 in22.1.1.1.2. Otherlap 0 01I 0 0 0 0 02,1.1.1.3. Toeehuel mIbt. 4 147 0 a I 0 4 14 7 a

2..12.It.rardlete meat.t 0 0 la 0 so2 0 1w8 0 1so 0 1 0 186 140 166 1262.....Rm afe e.t lel i1s 139 94 1.0oo 0 11. in1 I log

2.1.1.2.2. Ott.rgoodo 29 is 14 19o 0 29 to 14 192.1.1.2.8. 0th., 0 0 0 0 0

2.1.1.8. Ags,tiaa*len 1 0 0 0 0a2.1.2. Inter.t peyyi.te 0 0 0 0 0 0a 0 0 1 0 0 0 0 0P.1.2.1. PIne... Eh.o,' dome. I 0 0 0 0 0

2.1.3.Currpan%tru.de,e 0 0 0 0 0 0 0 0 0 0 to.31 be rivnt. aeee I 0 0 0 0 0

218ttCott ul0earet 0 9 0 0 0 0 0 1 0 0 0 0 02...21 ono. 0 0 0 0 02.18.22. ootnee budget I 0 0 0 0 0

2.1.3.2.3. emiel fund I 0 0 0 0 02.1.3.8.9 to broad I 00 0 a a

2.2. Coa4tal apeaditupe 0 0 0 7 0 is 0 89 0 241 0 le1 so 292.2.1. Flood eaeitol forw.tIas 7 to so 29 0 7 to so 292.*.2. ceeitei re"aft" 0 0l 0 0 0 0 0 0 0 aJ 0 0 0 0 0

2.2.2.1. to privot. ceoa~ 0 0 0 0 02.2.2.2. to Centrol Ouverneust 0 0 0 0 02.2.2.8. to *brea" 0 0 0 0 0

2.2.8. Doohr I

38. Curront bun..c (1.1... 2.1.) 0 0 (189) (4) (185) (14) (t.j (7) (18a) ( 0 (143) (180 (10) (142)

4o. rratifte Waere. (I. - 2.) 0 0 142 (10) as (80) 1W (5?) 1S0 (22)1 0 182 3 19 US6

5.ntroret peycmnt e.roree,

1. 0.egrelt baler-e. (4. - 5.) 0 0 190 (10) as (10) 1W (5) l60 (32)1 0 182 8 19 2

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