Angola is considering financial options from the IMF amidst rising bond yields and declining oil prices. The finance minister revealed ongoing talks while emphasizing the impact on fiscal health. As loan payments mount, the government is exploring various avenues, including sales of national assets to increase revenue.
Angola is currently in discussions with the International Monetary Fund (IMF) regarding potential financing packages, as its Finance Minister, Vera Daves de Sousa, recently disclosed. This comes at a crucial time, with trade wars and falling energy prices severely restricting the country’s access to international bond markets. This situation places significant pressure on the Angolan economy, heavily reliant on oil exports.
During an interview in Washington, where she attended the IMF-World Bank Spring Meetings, Minister Sousa explained, “We didn’t ask it formally — we were just trying to understand and explore what financial options we can have.” She noted that if the IMF presents proposals, discussions will take place within the government, including with President Joao Lourenco, before any formal request is made.
On the market front, Angola’s dollar bonds experienced a slight uptick on Monday, as the yield on bonds maturing in 2048 fell to approximately 13.05% by 11:27 a.m. in London. This decrease reflects a bit of relief for these notes, alongside others due in 2028 and 2029, marking them as among the better performers within emerging markets.
The timing may not be perfect for Angola, as it faces a growing wave of loan payments. This is heightened by the government allocating the majority of its fiscal revenues towards debt servicing and paying salaries. Notably, Angola is on the hook for $864 million on a bond maturing this November.
Since recovering from a prolonged civil war that ended in 2002, Angola has partnered with the IMF on two occasions. The latest collaboration was an extended fund facility amounting to $3.7 billion, initiated in 2018. Notably, Angola is also eyeing options with the World Bank and the African Development Bank to meet its financial needs rather than depending on the volatile international debt market.
Minister Sousa stated, “We will continue exploring those avenues and we will squeeze” expenditure in an effort to lessen the country’s financial reliance. With bond yields currently steep, she indicated it is “most likely” that Angola will remain out of international debt markets until there is a return to single-digit yields.
Just two months prior, Angola had ambitions of issuing around $1.5 billion in bonds throughout 2025, but the average yield on its dollar bonds has now surged to 13.5%. The increase positions Angola among the most distressed-looking governments, with its bonds trading at a near 930 basis point spread compared to U.S. Treasuries.
Although the $115 billion economy saw some recovery last year, it continues to rely significantly on oil—accounting for nearly all exports and approximately 60% of government revenue. Brent crude prices have dropped by about 10% this year, now nearing $67 per barrel, largely due to investor concerns over impending U.S. tariffs that threaten to slow the global economy.
In light of declining oil prices, Angola has prepared a stress analysis to understand the fiscal implications. The report indicates that if oil prices stabilize around $55, the government could manage operational adjustments without needing external assistance; however, the current budget is constructed with an anticipated oil price of $70. To bolster revenues, Sousa has news of pending stake sales in major companies, including the telecommunications giant, Unitel SA, and Banco de Fomento Angola SA, among others.
In summary, Angola is exploring aid from the IMF as it grapples with soaring bond yields amidst declining oil prices. Faces a challenging fiscal situation, the Finance Minister is assessing financial options while preparing for upcoming bond payments. The Angolan government aims to streamline operations and achieve necessary revenue through asset sales. Moving forward, the country is likely to navigate carefully, avoiding international debt markets until bond yields stabilize.
Original Source: financialpost.com
