Angolan civil war keeps potential economic powerhouse poor. Government spends 50 percent of its budget on armed forces

Blessed with vast oil reserves, a treasure in diamond deposits, and much fertile land, Angola should be an African economic powerhouse. Instead, the country's 8.6 million people are among Africa's poorest. Government and international relief officials are working hard to stave off famine among hundreds of thousands of people in the central highlands near Huambo and Bie. Once Angola's granary, this region is now the scene of ferocious fighting between the Army, which is backed by Cuba and the Soviet Union, and rebels supported by the United States and South Africa.

The 11-year-old war has decimated Angola's economy.

Agricultural production has declined 80 percent since independence in 1975. The diamond industry, once a major cash earner, has been brought almost to a halt by rebel attacks and a lack of technicians.

Only the oil sector has kept the economy afloat, permitting the Marxist government to spend massively on arms and to purchase food on the world market. But with the crash of prices for oil, Angolan officials expect to lose $1 billion in revenue.

Repeated South African invasions and the war against the rebels of the National Union for the Total Independence of Angola (UNITA) have cost the economy $12 billion, say government estimates. But many observers say this is a very conservative figure for all war-related costs since 1975.

In defiance of UN resolutions, South Africa has ruled Angola's southern neighbor Namibia (South-West) Africa since the mid-1960s. South Africa regularly stages raids into Angola, allegedly to rout a Namibian rebel insurgency which, according to South Africa, uses bases in southern Angola to launch raids into Namibia.

To counter the actions of UNITA and South African forces, the Angolan government spends 50 percent of the national budget on its armed forces. Half of its $2.7 billion foreign debt is related to military expenditures.

Food shortages are most severe where fighting is most intense -- on the fertile central plateau. The government says 20 to 30 percent of the children are malnourished.

The International Red Cross and UN relief agencies have been airlifting food to 500,000 people in Angola, mostly children, on and off for about 3 years. The airlifts are almost the only means of food distribution because rebel activity make roads virtually impassible.

But, this year alone the United Nations Children's Education Fund (Unicef) has lost six trucks to rebel mines and Howitzers, and the Red Cross has cut back its village feeding program in the province of Huambo because of the area is dangerous.

The state guarantees all workers a minimum of staples, such as rice, beans, powdered milk, and oil. But other goods must be bartered for on the street market. The nation's currency, the Kwanza, is of so little value that farmers refuse to sell their crops to the state for cash, demanding payment in consumer goods.

``We are now buying the harvest from the farmers, but we do not have enough goods to pay them,'' says one provincial governer.

The government is now taking small steps to increase production of consumer goods with which it can pay farmers for their crops.