* Rubbish rots, water contaminated as budgets cut
* Cholera, malaria and yellow fever increase in slums
* Government say tackling problem, deploying troops
By Herculano Coroado
LUANDA, Feb 11 (Reuters) - When a plunge in oil prices prompted Angola's government to slash public spending last year, street trader Antonio Simao Baptista had no idea it would leave his rundown suburb overwhelmed by filth and disease.
The budget of Africa's second largest oil exporter has been cut again this year and is 40 percent lower than two years ago.
Public services including rubbish collection and water sanitation, are overlooked by contractors who aren't being paid or can't import equipment due to foreign exchange shortages, contributing so a surge in deadly diseases.
"Look at the garbage and also the water we drink is filthy. The water in my home is brown. I was raised in the colonial-era and I have never seen this before," said Baptista, 60, swatting away flies and mosquitoes swarming overhead.
An outbreak of yellow fever has killed 37 people since December while there has been an increase in reported cases of malaria, cholera and chronic diarrhoea, health officials said on Wednesday.
The yellow fever outbreak began in Luanda's vast Viana suburb of 1.6 million people but has spread to other parts of the country with eight new cases reported in the last 24 hours.
In Viana and other poor Luanda suburbs piles of uncollected waste block traffic and some residents have resorted to setting fire to hills of rubbish, sending toxic fumes into overcrowded slums.
The situation has worsened since the rainy season began in December as heavy storms wash discarded waste and contaminated water into supplies used for washing and drinking.
MORGUES AND MOSQUITOES
At Luanda's Cajueiro Hospital this week crowds of people waiting for treatment for cholera, diarrhoea and suspected yellow fever were packed into small rooms with relatives helping nurses overwhelmed by increased patient numbers.
"You see? One more person dead now," said Maria Baptista, 43, pointing at a sobbing woman who was just informed about the death of a family member.
Baptista, no relation of Antonio, was queuing outside the hospital with dozens of other people trying to get into the packed clinic.
The annual budget for rubbish collection in the capital Luanda was slashed this year to $10 million from $30 million, resulting in a sharp deterioration in the sanitation of many poorer suburbs and a rise in related illnesses.
"Most of the problems are caused by mosquito bites resulting from tons of waste all over the town," said Vlademiro Russo, a leading environmentalist who advises the Angolan government.
"It's becoming an emergency issue and a crisis in some areas. It is very important we find a solution fast."
Angola relies on crude exports for around 95 percent of its foreign exchange earnings and a 70 percent decline in oil prices since mid-2014 has hobbled Africa's third largest economy, sending the kwanza currency plummeting.
When the budget for waste removal was cut in August last year, the central government placed the management of sanitation under local municipal offices but funding was limited and many outstanding contracts had not been paid.
Central government has held emergency meetings this week and could deploy security forces to help tackle the crisis.
"We will redefine the ways of combating the disease. The security forces should be supporting the health agencies throughout the country," Ministry of Interior spokesman Simão Milagres said on Wednesday.
ANGER AND INEQUALITIES
The unsanitary conditions many poorer Angolans have to endure is not the reality in other areas of Luanda, which is one of the world's most expensive cities for foreigners and home to generations of billionaire oil magnates and politicians.
Though inequality is a major problem across much of Africa, Angola provides one of the starkest examples. The Gini Coefficient, a World Bank measure of inequality, puts Angola down at 169th out of 175 countries.
Last week, President Jose Eduardo dos Santos inaugurated the new "Ambiente Square" in central Luanda, an upmarket expanse of landscaped gardens developed by Portuguese construction firm Centro Cerro and funded by Angola's state-oil company Sonangol.
Many Angolans are unhappy about the government's failure to bridge the inequality gap.
"Go to the morgues and you will see them full of dead children from disease. The government is committing a crime," said street trader Baptista, who says he is reconsidering his lifelong support for dos Santos' ruling MPLA.
"We provided support to this government but we see everything is derailing. The rich drink nice clean water, while the poor are left to die."
But despite the anger, memories of a 27-year civil war that ended in 2002 and one of the best-funded armies in Africa keep any dissent muted.
Dos Santos, a Soviet-educated petroleum engineer who has been in charge for 36 years, still has strong support within the MPLA and is expected to run in a general election next year.
UNITA, the main opposition party and the MPLA's former civil war foe, is disorganised and still has its main support base in Angola's interior, far from the densely-populated coastal regions. ($1 = 154.84 kwanza) (Writing by Joe Brock; editing by Anna Willard)