Angolan economic growth is likely to slow to an average of 3.5 percent a year between 2015 and 2016 from about 4 percent last year, the International Monetary Fund said on Tuesday, citing weaker oil prices.

"Economic activity is projected to slow down as the industrial, construction and services sectors adjust to cuts in private consumption and public sector investments," said Ricardo Velloso, the global lender's Africa division chief.

Angola's economy has grown rapidly since a 27-year civil war ended in 2002, peaking at 12 percent three years ago, but a recent sharp drop in oil prices has sapped dollar inflows, dented the local currency, hammered public finances and prompted heavy government borrowing.

Oil output represents 40 percent of gross domestic product and over 95 percent of export revenue. Benchmark Brent is trading below $50 a barrel, close to its 2015 low, after an 18 percent drop in July.

"Recent developments underscore the importance of promoting the diversification of the economy," Velloso told reporters in Luanda.

Velloso, who headed an IMF team tasked with assessing Africa's second-biggest oil producer's fiscal framework and its ability to manage the impact of falling oil revenues, said the IMF expected the economy to start recovering in 2017.

However, the IMF said the Angolan 2015 budget deficit was likely to decline to 3.5 percent of GDP from 6.5 percent last year after the government's timely reaction to a fall in the price of crude oil.

Angola cut its 2015 budget spending by 1.8 trillion kwanza ($14.35 billion)to 5.4 trillion kwanza after slashing expected oil revenues.

Portugal's former colony has been taking on more debt to shore up its finances with sources telling Reuters earlier this year that it plans to borrow up to $10 billion in external debt, including issuing up to $1.5 billion Eurobond.

The IMF said it expected Angola's public borrowings to surge to 57 percent of GDP by the end 2015. Rating agency Fitch said public borrowings were about 33 percent of GDP last year.

But the IMF said there was still an "imbalance" between the primary market and grey market that needed to be addressed to maintain the official exchange rate.