The measurement of budgetary operations in highly distorted economies : the case of Angola

In a highly distorted economy such as Angola's, budget accounts can be misleading - because prices in the parallel market, including the exchange rate, represent up to 100 times official prices. Parallel prices are the real opportunity costs for consumers and guide them in their decisions. The government collects its taxes and pays its expenses in two currencies: Kwanzas that have attached buying rights, such as access to hard currencies or goods, and Kwanzas which have to be used in the parallel market. This paper also discusses the impact policy adjustment would have on the budget deficit.