Fitch Affirms Angola at ‘B-‘ with Stable Outlook
Angola’s long-term foreign-currency issuer default rating (IDR) of “B-” with a stable outlook has been confirmed by Fitch Ratings. According to a rating note from Fitch, high levels of foreign-currency denominated government debt, high inflation, and poor governance indicators are all reflected in Angola’s credit ratings.
The country is also noted as having one of the highest levels of commodity dependence among Fitch-rated sovereigns. Fitch revealed that the downsides are balanced by high international reserves relative to peers, current account surpluses, and manageable debt repayment risks due to a still supportive oil price environment.
On current account, Fitch expects Angola to continue to run current surpluses of 6.0% of GDP in 2024 and 1.3% in 2025, from 3.8% in 2023. Analysts said the widening of the surplus in 2024 will reflect higher oil export receipts due to stable Brent prices—which average USD80 per barrel from USD82 in 2023—and higher production, as well as a contraction in imports driven by FX scarcity and the weaker kwanza.
The narrower surplus in 2025 mostly reflects expectation of lower crude oil export receipts owing to lower average Brent prices , which slowed down to USD70. Angola is however noted to post strong foreign-exchange buffer amidst weak Kwanza.
“We expect Angola’s level of international reserves to remain strong relative to peers over 2024-2026. We expect reserves at the end of 2024 to be USD15.2 billion, unchanged from 2023, and covering 5.7 months of the country’s current external payments (CXP).
“This is well above the 3.7 months of coverage we expect for the ‘B’ median in 2024’, Fitch said.
Analysts expect reserves to fall to USD14.5 billion over 2025-2026, due to the narrower current account surpluses and still strong net government debt repayments, but coverage of CXP will remain strong relative to peers at 5.5 months.
On a positive side, Angola is noted to have remained committed to debt repayment. The government’s commitment to external debt servicing continued in 2024 amid challenging external financing conditions.
Cumulative net external debt repayments of principal amounted to USD1.7 billion during January-September 2024, after already significant net repayments of USD1.6 billion in 2023.
“We expect government debt/GDP to fall to 63.9% of GDP at end-2024 and 58.6% in 2026, from 73.7% at end-2023, driven by high nominal GDP growth and primary surpluses that will offset the impact of exchange-rate depreciation on the large share of external debt (70.0% of the total).
“Our lower debt/GDP figures relative to our previous review (June 2024) reflect the rebasing of Angola’s nominal GDP by the country’s Bureau of Statistics in May 2024, which translated into a 13.1% increase in the level of 2023 GDP”.
Fitch expects Angola’s external amortisations to remain high at USD6.2 billion in 2025 and USD5.4 billion in 2026 compared with an estimated USD5.4 billion in 2024.
These are expected to be met through a combination of the government’s oil revenues, disbursements from bilateral and multilateral sources, financing lines from commercial banks, and liquidity in escrow accounts related to oil-backed loans to China.
“We expect Angola’s external market access to improve over the forecast horizon, amid easing monetary policy in the US and Eurozone”.
Angola has a high ratio of government interest payments to revenue, which Fitch estimates at 28% in 2024, compared with the ‘B’ range median of 13.9%.
Analysts also expect a significant decline in domestic amortisations to ease some of the pressure on the government’s financing needs. The rating note stated that domestic amortisations in 2024 are substantial, at 8.3% of GDP, but we estimate a decline to 3.0% of GDP on average in 2025 and 2026.
Fitch considers that FX liquidity in the economy remained constrained in 2024, posing headwinds to economic growth.
Analysts understand the increase in sales in the domestic FX market has been insufficient to significantly reduce the demand backlog in the banking sector or change market expectations of FX liquidity conditions.
“We expect FX supply to remain tight over our forecast horizon, with declining Brent prices, fiscal deficits and high government external amortisations as the authorities will chose to preserve international reserves”.
Fitch forecasts Angola’s government deficit at 2.3% of GDP in 2024, unchanged from 2023, before widening to 3.3% in 2025 and 2.8% in 2026.This will reflect an oil price-driven decline in government revenue that will not be offset by a commensurate fall in expenditure.
Analysts said they expect total government revenue to fall by 2.1pp of GDP to 15.4% between 2023 and 2026.
The country’s expenditure is expected to fall by 1.5pp over the same period to 18.3% of GDP, mostly owing to lower fuel subsidies.
But analysts assume an increase in expense on goods and services and public sector salaries that will prevent a more significant adjustment in total expenditure.
“We assume the authorities will continue to raise administered fuel prices, leading to a decline in this expense to 1.3% of GDP in 2026 from 3.1% in 2023”.
Fitch analysts forecast Angola’s real GDP growth to increase to 3.2% in 2024, from 1.0% in 2023, mostly due to base effects driven by the recovery of crude oil production.
The growth forecast was anchored on expectation that oil production would increase to an average of 1.13 million barrels per day (mbpd) 2024, from an average 1.1mbpd in 2023.
In 2025, analysts expect economic growth to decelerate to 2.2%. Growth is expected to dip to 2.4% in 2026, owing to assumption of lower oil production of 1.1mbpd over the horizon, as well as the dampening impact of high inflation and FX scarcity on the non-oil economy.
Fitch analysts expect inflation to average 28.0% in 2024, driven by kwanza depreciation and increases in administered fuel prices. #Fitch Affirms Angola at ‘B-‘ with Stable Outlook Stanbic IBTC Adds Fixed Income Asset into Securities Lending Services
