Angola Seeks IMF Support Amid Rising Bond Yields and Oil Price Declines
Angola is in talks with the IMF to explore potential financing options as the country faces increased bond yields and a slump in oil prices. With the government under pressure from rising loan payments and a heavy reliance on oil revenues, Minister Vera Daves de Sousa indicated that several strategies, including stake sales in key enterprises, are being pursued to alleviate financial pressures.
Angola is currently in discussions with the International Monetary Fund (IMF) regarding potential financing options, as the country faces significant challenges in its bond markets due to trade conflicts and falling oil prices. Finance Minister Vera Daves de Sousa revealed these talks took place last week during the IMF-World Bank Spring Meetings held in Washington.
De Sousa mentioned, “We didn’t ask it formally — we were just trying to understand and explore what financial options we can have.” She noted that once the IMF provides proposals, she would relay this information to the Angolan government, including President Joao Lourenco, to decide on a possible formal request.
In somewhat positive news for investors, Angola’s dollar bonds showed improvement on Monday. The yield on the 2048 dollar bonds fell to approximately 13.05% around 11:27 AM in London. Notably, these bonds, along with several others maturing in 2028 and 2029, were among stronger performers in the emerging markets landscape.
As Angola grapples with upcoming loan payments, a considerable portion of its fiscal resources is directed toward salaries and debt servicing. This includes repaying a bond worth $864 million that is due to mature in November, placing additional pressure on the nation’s finances.
Post-civil war, Angola has had two agreements with the IMF since 2002, the most recent being a $3.7 billion extended fund facility initiated in 2018. Alongside potential IMF help, the country is also contemplating loans from the World Bank and the African Development Bank, steering away from international debt market reliance.
“We will continue exploring those avenues and we will squeeze” expenditure to alleviate financing needs,” de Sousa stated, emphasizing the government’s commitment to fiscal prudence.
The finance minister also indicated it is “most likely” that Angola will refrain from accessing international debt markets until bond yields decrease to single digits. Just a couple of months prior, Angola aimed to issue around $1.5 billion in bonds within 2025. However, with bond yields having surged to around 13.5%, the situation appears more precarious, as the spread of about 930 basis points in comparison to US Treasuries nears the distress threshold of 1,000 basis points.
Despite the Angolan economy’s nominal growth last year, it remains heavily reliant on oil, which constitutes almost all of its export income and approximately 60% of government revenue. Brent crude prices have dipped roughly 10% this year, trading below $67 a barrel, attributed to anticipated global economic slowdowns driven by a series of US tariffs.
In response, Angola has conducted stress analyses to evaluate the fiscal ramifications of declining oil prices. De Sousa noted that if prices stabilize around $55, adjustments on the expenditure side would allow the country to navigate without needing external assistance. The current budget is based on an expected oil price of $70 per barrel.
To bolster revenue, the government plans on finalizing sales of stakes in key enterprises, most notably the telecommunications giant Unitel SA, as well as Banco de Fomento Angola SA and Standard Bank de Angola SA. This strategy seeks to shore up finances amidst an uncertain economic situation.
In summary, Angola is actively seeking financial solutions amidst rising bond yields and declining oil prices. As Minister Vera Daves de Sousa engages with the IMF and other financial institutions, the Angolan government is also making plans to sell stakes in major companies to enhance revenue. The economic outlook remains precarious, largely due to the nation’s dependence on oil exports and upcoming debt repayments. With careful navigation, Angola hopes to stabilize its financial situation without relying heavily on international markets.
Original Source: financialpost.com
