Angola, the Opec producer that relies on oil for about 80 percent of its revenue, may miss its budget forecast this year after crude production fell to the lowest in seven years.
The country has forecast 3.313 trillion kwanzas (R363.3 billion) in taxes from oil companies this year, according to the budget posted on the Finance Ministry website.
Revenue will fall short of that by $3 billion (R32bn), according to Banco Angolano de Investimentos, the country’s largest bank by assets.
Production averaged 1.61 million barrels a day this year, the lowest for the first seven months since 2007, Bloomberg estimates show.
“The government is highly vulnerable to experiencing shortfalls in its budget,” Ben Payton, a senior Africa analyst at risk advisory company Maplecroft, said. “Production has peaked at most major existing fields and the country faces a gap of at least three years until new fields come online.”
Brent crude has dropped about 7 percent in 2014, trading at the lowest for the time of year since 2010 amid concern that the global market is oversupplied.
Weak refining margins in Europe and Asia left an “overhang” in supply from West Africa, the International Energy Agency said this month.
Amilcar Xavier, a Finance Ministry spokesman, did not respond to three calls and an e-mail on Tuesday seeking comment on the budget.
Angola’s oil output dropped this year as mature fields operated by companies including Chevron pumped less and BP carried out maintenance at its Greater Plutonio site.
Petroleum Minister José Maria Botelho de Vasconcelos is planning to increase output to 2 million barrels a day next year, helped by projects including Eni’s West Hub in Block 15/06 that is to begin by the end of this year.
New projects wouldn’t start quickly enough to meet the 2 million-barrel target, David Thomson, a UK-based analyst for Wood Mackenzie, said in May.
Nigeria, a fellow member of Opec, produces about 2.1 million barrels a day.
“Angola’s economy remains dangerously dependent on oil exports,” Payton said.
“Despite reforms undertaken at the behest of the International Monetary Fund, the government’s budget forecasting has been unrealistic and the performance of revenue collection agencies has been well below expectation.”
Government income may also drop after new tax rules were approved in June, exempting payment of corporate and personal income duties incurred prior to 2013.
The changes are intended to help update the country’s decades-old tax system, broadening collection and increasing revenue as Angola recovers from a 27-year civil war that ended in 2002.
Angola was aiming to boost its non-oil tax revenue by 34 percent this year, Joao Fonseca, an executive director at Banco Angolano de Investimentos, said.
The tax amnesty put that at risk, he said.
“Collecting tax from past evaders is likely to be low and the expectation of future amnesties can induce evasion in those who previously complied,” Odd-Helge Fjeldstad, a senior researcher at the Norway-based Christian Michelsen Institute, said in an e-mail.
The amnesty was proposed by members of the ruling Popular Movement for the Liberation of Angola, while opposition legislators voted against, Fjeldstad said. – Bloomberg