The government's aim over the forecast period is to guide Angola's transition from post-conflict reconstruction to sustained economic growth. Policy will focus on implementing the poverty-reduction programme and the "second wave" of infrastructure rehabilitation without jeopardising macroeconomic stability as rising oil output and high global prices boost government revenue. The government is committed to progressively phasing out fuel subsidies-which cost an estimated 6% of GDP per year-over the next five years and using these resources for poverty-alleviation expenditure. However, the government's ability to implement reforms will be hampered by uncertainty over its key economic team, which was reshuffled in October 2010, and the redistribution of responsibility for economic policy between the economy, finance and planning ministries. As a result, progress on the implementation of IMF-style reforms will be uneven as the economic and political elite seek to block or undermine reforms that threaten their interests-most notably the new Probity Law, which in theory forbids conflicts of interest for government officials.

The government will seek to expand existing financing and credit lines from its partners, notably China, Brazil and Portugal, while also seeking new financing from members of the Paris Club. Having obtained a B+ sovereign rating from the main ratings agencies, Angola is keen to raise financing on the international bond markets. However, given damaging revelations over the dramatic rise in domestic debt arrears during 2008-09, which could result in the lowering of its rating, the government is likely to delay its first bond issue until late 2011 at the earliest. Despite rising capital inflows, the level of foreign-exchange reserves and the depreciation of the kwanza remain concerns for the government, which was forced to loosen the currency's unofficial peg to the US dollar in late 2009. Although the reserve position should improve over the forecast period, the risk remains of a further sharp devaluation.

A key challenge for the government will be the successful management of the stand-by arrangement (SBA) with the IMF, worth an estimated US$1.4bn and running until February 2012. If successful, this could pave the way for a full IMF-monitored programme-something that Angola has never had. However, in the light of the administration's hostility to external criticism, the relationship will go through periodic strains, especially given damaging revelations about the build-up of domestic debt arrears in 2008-09. A further challenge will be to regain the confidence of investors in the government's ability and willingness to meet its payment obligations, which has been severely shaken, and allow the free movement of capital, which is subject to great constraints.