“Although the new issuance provides Angola with liquidity relief amidst its heavy burden of external repayments, we remain concerned about this oil producer’s high annual gross financing needs and the high debt-to-GDP ratio,” analysts commented on Angola’s debt issuance earlier this week.
Angola, for the first time since 2022, issued foreign currency-denominated debt securities (Eurobonds) worth a total of $1.75 billion (approximately €1.6 billion) on Monday. The operation was structured in two tranches: one tranche of $1 billion maturing in five years (2030) and another of $750 million maturing in ten years (2035), with semi-annual interest rates (coupon) of 9.25% and 9.78%, respectively.
In an analysis sent to clients, the Africa department of a London consultancy noted that it maintains “a cautious outlook on the fiscal situation, given the levels of Brent oil prices,” which are estimated to be around $80 per barrel in the medium term.
“The extra money could help mitigate the impact of new subsidy cuts by funding policies to offset the short-term negative impact,” analysts added, pointing out that through the issuance, the country received “much-needed relief, taking advantage of a favorable price window to issue the long-awaited new debt instruments.”
The financing of $1.75 billion “can help cushion the impact of unpopular austerity measures, allowing the government to proceed with crucial fiscal reforms” to ensure investment in economic diversification and reproductive infrastructure.
In the view of Oxford Economics, “Angola’s macroeconomic climate has shown promising signs of improvement after a challenging start to the year,” with reforms, rising oil prices, and production ensuring “some stability in the economy,” leading to a drop in the interest rates demanded by investors to around 10%, the threshold above which the country considered accessing markets impossible.
In a statement released on the day of the operation, the Ministry of Finance highlighted that the volume of registered intentions, which exceeded $6 billion, “demonstrates the credibility and confidence of international markets in the Angolan economy.”
The statement explains that this operation aims to diversify funding sources, optimize public debt management, and contribute to fiscal balance, “aligned with the country’s risk perception and the global economic environment.”
The government also announced plans to complement external financing with the issuance of Foreign Currency Treasury Bonds (OT-ME) worth up to $300 million, intended to fund the 2025 State Budget.
This initiative is part of a strategy to attract resources to meet the funding needs of the 2025 State Budget, “allowing the pursuit of essential economic and social goals set out in the General State Budget,” the government explained.
Other objectives include securing domestic financing, diversifying funding sources for the State Budget, and diversifying financial instruments to channel the economic agents’ savings, the document concludes.
