Angola is in discussions with the IMF for potential financing solutions as rising bond yields, fueled by declining oil prices, restrict access to international markets. Finance Minister Vera Daves de Sousa emphasized the urgency of evaluating financial options. Angola’s economy, heavily dependent on oil, faces serious fiscal challenges, prompting considerations of revenue-enhancing measures. Asset sales are part of the strategy to improve financial stability.
Angola is actively exploring financing options with the International Monetary Fund (IMF) as rising bond yields amid falling oil prices render the nation’s access to international bond markets increasingly precarious. The Angolan finance minister, Vera Daves de Sousa, announced recently that her government is assessing various financial packages with the IMF during her attendance at the IMF-World Bank Spring Meetings in Washington.
While discussions were held regarding potential assistance, Sousa clarified that they did not formally request aid from the IMF, emphasizing that they simply aimed to understand available avenues for financing. She noted that any proposals raised by the IMF will be thoroughly debated with Angolan officials, including President Joao Lourenco, before considering an actual request for support.
On a more positive note, Angolan dollar bonds experienced a gain, with yields on its 2048 dollar bonds decreasing to approximately 13.05% by 11:27 AM in London last Monday. Bonds maturing in 2028 and 2029 mirrored this upward performance, positioning themselves favorably within the emerging markets sphere.
However, Angola faces looming financial pressure, as the government projects a spike in loan payments. A significant portion of Angola’s fiscal revenue is currently dedicated to salary payments and debt servicing. Notably, a bond worth $864 million is set to mature in November, adding to the urgency of the situation.
Since exiting a lengthy civil war in 2002, Angola has engaged in two financing programs with the IMF, the latest being a substantial $3.7 billion extended fund facility established in 2018. Besides the IMF, Angola is also eyeing potential loans from other institutions such as the World Bank and the African Development Bank instead of relying solely on international debt markets.
In considering future strategies, Sousa remarked, “We will continue exploring those avenues and we will squeeze” expenditures to alleviate financing pressures. She went on to convey skepticism regarding Angola’s prospects in international debt markets, reiterating that it is “most likely” the nation will refrain from such avenues until bond yields decrease to single digits.
Two months ago, Angola aimed to issue approximately $1.5 billion in bonds throughout 2025. However, the average yield on the country’s dollar bonds has since escalated to around 13.5%, making it one of the highest yields globally. The current spread relative to U.S. Treasuries sits close to 930 basis points, nearing the 1,000 basis point threshold often viewed as indicative of financial distress.
Despite a rebound in the $115 billion economy last year, Angola’s heavy reliance on oil is concerning, as the commodity accounts for virtually all exports and around 60% of government income. Oil prices have decreased nearly 10% this year, now under $67 per barrel, influenced by anticipated economic slowdowns from U.S. tariffs impacting a multitude of countries.
The government initiated a “stress analysis” to evaluate the influence of falling oil prices on fiscal balances. Sousa indicated that with oil prices averaging around $55, the country could sustain itself without requiring additional external support, provided some spending adjustments are implemented. Currently, the government budget is predicated on an oil price expectation of $70.
To bolster revenue prospects, Sousa also disclosed plans to finalize notable asset sales this year, including stakes in major firms like telecommunications company Unitel SA, Banco de Fomento Angola SA, and Standard Bank de Angola SA. Moving forward, these actions are part of Angola’s broader strategy to stabilize its financial footing amidst challenging economic circumstances.
In summary, Angola is navigating troubled waters as it considers IMF financing and deals with soaring bond yields triggered by plummeting oil prices. The situation presents significant challenges for the nation, particularly with upcoming loan repayments and heavy reliance on oil revenue. Angolan authorities are strategizing to mitigate the financial pressures while exploring alternative funding options to sustain the economy in the face of global economic uncertainties. As Angola endeavors to stabilize its fiscal landscape, the next steps with the IMF and potential asset sales could be crucial for the country’s financial future.
Original Source: financialpost.com
