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I. Summary

The Angolan government has consistently mismanaged its substantial oil revenues and, despite rhetorical commitments, has yet to demonstrate a meaningful commitment to reform. In recent years, literally billions of dollars in oil revenues have illegally bypassed the central bank and remain unaccounted for. Such missing revenues reflect a failure of government accountability more generally and are directly linked to the Angolan government’s continuing failure to foster institutions that uphold the rule of law and human rights.

The sums involved are staggering. From 1997 to 2002, unaccounted for funds amounted to some U.S.$4.22 billion. In those same years, total social spending in the country—including Angolan government spending as well as public and private initiatives funded through the United Nations’ Consolidated Inter-Agency Appeal—came to $4.27 billion. In effect, the Angolan government has not accounted for an amount roughly equal to the total amount spent on the humanitarian, social, health, and education needs of a population in severe distress.

Due at least in part to such mismanagement and corruption, the government also has impeded Angolans’ ability to enjoy their economic, social, and cultural rights. It has not provided sufficient funding for essential social services, including healthcare and education. As a result, millions of Angolans continue to live without access to hospitals and schools, in violation of the government’s own commitments and human rights treaties to which it is a party.

In recent years, as oil revenues surged, the Angolan government has refused to provide information about the use of public funds to its population, undermining their right to information. It has failed to establish hundreds of courts and allowed the judiciary to become dysfunctional, undermining Angolan’s ability to hold government officials and others accountable. And it has not fully committed to free and fair elections, thus removing another avenue of accountability.

Had the government properly accounted for and managed the disappeared funds it is likely that more funds would have been allocated to the fulfillment of economic, social, and cultural rights, such as increased spending on education, health, and other social services. The government of Angola has not complied with its obligations under international human rights law because it has misallocated resources at the expense of the enjoyment of rights.

When a government is the direct beneficiary of a centrally controlled major revenue stream and is therefore not reliant on domestic taxation or a diversified economy to function, those who rule the state have unique opportunities for self-enrichment and corruption, particularly if there is no transparency in the management of revenues. Because achieving political power often becomes the primary avenue for achieving wealth, the incentive to seize power and hold onto it indefinitely is great. This dynamic has a corrosive effect on governance and ultimately, respect for human rights. Instead of bringing prosperity, rule of law, and respect for rights, the existence of a centrally controlled revenue stream—such as oil revenue—can serve to reinforce or exacerbate an undemocratic or otherwise unaccountable ruler’s or governing elite’s worst tendencies by providing the financial wherewithal to entrench and enrich itself without any corresponding accountability. Human rights typically are among the first casualties. This has happened in Angola.

Despite repeated efforts by diverse actors to promote greater transparency—including multilateral financial institutions, nongovernmental organizations (NGOs), corporations, and even other governments—the Angolan government has sought to maintain the status quo. The Angolan people, who have endured decades of war while seeing their country’s resources mismanaged and its social development stunted, continue to be the primary victims of government recalcitrance.

The International Monetary Fund (IMF), interested in transparency for economic reasons, has been an important force pushing for greater fiscal transparency in Angola. Human Rights Watch does not take a position on the work of the international financial institutions per se, but can and does examine the positive or negative impact IMF activities can have on human rights. Whatever one thinks of the IMF’s economic prescriptions, its efforts to promote transparency in the oil sector in Angola have been an important source of leverage for those interested in human rights improvements in the country. This report focuses on two aspects of IMF-led pressure for reform: the so-called “Oil Diagnostic” monitoring system set up by joint agreement of the IMF and the Angolan government starting in 2000; and the IMF’s findings regarding the government’s consistent lack of transparency and gross mismanagement of public funds.

The Oil Diagnostic showed that billions of dollars from the Sociedade Nacional de Combustiveis de Angola (Sonangol), the state-owned oil company, illegally bypassed the Angolan central bank and that the government did not have any procedures in place to reconcile hundreds of millions of dollars of discrepancies in its accounting of oil revenue. The overall picture from the Oil Diagnostic is one of gross mismanagement of a country’s public funds, largely derived from oil production and sales. The IMF went further and detailed billions of dollars in unexplained expenditures, consistent government unwillingness to disclose the use of those funds, and other troubling examples of government opaqueness.

Recent changes in Angola, however, including an end to the civil war, renewed government interest in better political and economic integration with the rest of the world, and rising popular demands for change, have created an unprecedented opportunity for reform. How Angola manages its oil revenues will be an important barometer of progress toward transparency, accountability, good governance, and increased respect for human rights. Whether meaningful reforms are implemented depends ultimately on the Angolan government, but the international community can play an important role by using its influence to press forcefully for change. Otherwise, the promise of Angola’s wealth will be squandered once more at the expense of good governance and human rights.

This report analyzes the IMF’s overall relationship with the government and successes and failures of the Oil Diagnostic to date. It examines what the Oil Diagnostic and failed efforts at reform can tell us about Angolan government oil revenue mismanagement, and what continuing difficulties in obtaining basic information from the government and major gaps in the data tell us about the ground still to be covered before the Angolan government can meaningfully be said to embrace transparency and accountability. It also analyzes how much money is missing in comparison to how much has been spent on activities and institutions that could facilitate Angolans’ enjoyment of their civil, political, economic, social, and cultural rights.

Based on research conducted in Angola, the United States, and United Kingdom between 1999 and 2003, the report begins with a brief overview of IMF efforts to promote fiscal transparency in Angola. It then looks in detail at oil revenue mismanagement revealed by the Oil Diagnostic, the massive scope of fiscal discrepancies and unexplained Angolan government expenditures in recent years, and systemic government attempts to limit access to information. The report concludes with a survey of existing international initiatives aimed at promoting greater transparency, with analysis of how each might be used to promote change in Angola.


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January 2003