(EnergyAsia, July 20 2016, Wednesday) — The International Monetary Fund (IMF) said it may return to Angola in October to resume discussions after the financially-strapped government of President Jose Eduardo dos Santos rejected an offer of a loan bailout package.

dos Santos told the fund his government did not want the proposed loan and was interested only in consultations following failed talks between the two sides had met in the capital city of Luanda in June.

Angola’s energy-dependent economy has been hard hit by the oil price collapse over the last two years. It economy grew by three percent last year and is expected to slow further to 2.5% in 2016, down sharply from 6.8% in 2013 when Brent crude was still trading above US$100 a barrel.

At the end of a two-week visit to meet Angolan officials, the IMF team issued a statement with a dismal outlook for Africa’s largest oil producer:

“Inflation has accelerated and reached (year-on-year) 29.2% in May 2016, reflecting a weaker kwanza that has depreciated over 40% against the US dollar since September 2014, higher domestic fuel prices following the removal of fuel subsidies, and loose monetary conditions.

“The external current account balance has moved into deficit, although international reserves have been protected and remain at relatively comfortable levels.

“The outlook for 2016 remains difficult, and economic activity will likely decelerate further.”

At best, the fund said Angola’s economy might have a “modest recovery” in 2017 if it is able to significantly improve trade figures and foreign exchange reserves. For a government that relies on oil for 70% of its revenues, this prospect looks unlikely as long as Brent crude continues to trade in the US$40 to $50 a barrel range.

According to Capital Economics, Angola’s foreign exchange reserves have plunged from more than US$36 billion in 2013 to around US$23 billion today, forcing the government to devalue the currency.

Angola became Africa’s largest crude oil producer in the second quarter as it pumped out more than 1.7 million b/d to overtake Nigeria which saw its output slump to less than 1.5 million b/d as conflict between local militia groups and the government have intensified in its main oil-producing areas.