Fitch Affirms Angola at ‘B-‘ with Stable
Fitch Ratings has affirmed Angola’s credit ratings with the outlook accorded as stable. Angola’s credit rating reflects weak governance indicators, high inflation, high levels of foreign-currency-denominated government debt, and one of the highest levels of commodity dependence among Fitch-rated sovereigns.
“These factors are balanced by international reserves higher than peers and current account surpluses that provide some buffer against a more challenging oil price environment and limited sources of financing”, Fitch said.
The global ratings agency analysts expect Angola to run current account surpluses of 1.3% of gross domestic product in 2025 and 2026, down from 5.5% in 2024.
The narrowing of the surplus will primarily reflect lower crude oil exports due to Fitch analysts’ assumption of average annual Brent prices of USD65 per barrel in both 2025 and 2026, down from USD79.5 in 2024.
Fitch also expects a small decline in domestic oil production to 1.07 million barrels per day (mbpd) over the same period from 1.1 mbpd in 2024.
Angola’s international reserves is expected to provide a significant external financing buffer. Fitch expects reserves to decline from USD15.8 billion at end-2024 to USD14.5 billion in 2025 and USD14.0 billion in 2026, reflecting high external debt servicing by the government.
Angola’s external liquidity ratio will remain close to 110%, slightly below the ‘B’ median of 130%. The coverage of current external payments by international reserves will remain around six months, above the ‘B’ median of around 4.5 months.
Government debt/GDP declined sharply to 54.6% of GDP at end-2024 from 70.7% in 2023, mostly driven by primary surpluses, strong nominal GDP growth, and net external debt repayments of USD1.9 billion.
The authorities audited consolidated government debt, which resulted in the identification of duplicated data and led to a USD1.8 billion reduction of the debt stock for end-2024.
Fitch forecasts Angola’s debt/GDP will fall to 48.1% at end-2026, reflecting primary budget surpluses and still strong nominal GDP growth, offsetting the impact of further exchange-rate depreciation. Angola’s fiscal deficit narrowed to 1.0% of GDP in 2024 on a commitment basis from 1.9% in 2023, driven by a decline in expenditure.
The government’s expense on fuel subsidies, included above-the-line and amounting to a significant 2.7% of GDP in 2024, does not produce a cash outlay for the government, as it is paid for by national hydrocarbons company Sonangol, which then reconciles the position with tax owed to the government.
This implied a cash surplus of 1.7% of GDP in 2024 for the government. Fitch forecasts fiscal deficits (commitment basis) of 2.4% of GDP in 2025 and 2.3% in 2026, mainly reflecting an oil-driven decline in government revenue.
“We expect expenses on subsidies to fall to 1.8% of GDP in 2025 and 1.4% in 2026 as authorities continue to raise administered prices of fuels, implying small cash deficits of 0.6% and 0.9% for those respective years”.
A stronger fiscal adjustment will be prevented by expenditure pressures associated with the commemoration of Angola’s 50 years of independence (in 2025) and general elections in 2027.
Fitch expects Angola’s external amortisations to remain high at USD6.5 billion in 2025, from USD6.0 billion in 2024, and to fall to USD5.2 billion in 2026. “We also expect Angola’s interest/revenue ratio to remain close to 30%, well above the ‘B’ median of 13%”.
The broader gross financing needs will ease due to a decline in domestic amortisations, to around 2% of GDP or about USD2.2 billion, from 5% (close to USD5.0 billion) in 2024. Angola has resorted to some short-term external financing in the absence of external bond market access.
Nevertheless, Fitch analysts said they expect gross financing needs to be met through disbursements from the World Bank, the African Development Bank, financing lines from export-credit agencies, and issuance in the domestic market – including US dollar-denominated bonds.
The treasury could also rely on a provision in the 2025 budget allowing it to borrow up to USD2 billion from the central bank with a repayment period of up to five years.
Real GDP growth accelerated to 4.4% in 2024, reflecting a recovery in oil production and a strong performance of the services and diamond extraction sectors.
Fitch expects growth to decelerate to 2.8% in 2025 and 3.0% in 2026, reflecting lower oil production and revenue as well as tight monetary policy.
“We forecast inflation to average 20% in 2025 and 16% in 2026, from 28% in 2024. This will be well above the ‘B’ median of around 4% for the same period.
“The monetary stance of the central bank, which has increased its key policy rate by 250bp since October 2023 to 19.5%, and base effects will drive disinflation”.
“Risks to our forecast stem from an early loosening of monetary policy in the context of still ongoing fuel subsidy reform, depreciation of the kwanza, and the government’s import-substitution strategy that could put upward pressure on prices of key food staples”, Fitch said. #Fitch Affirms Angola at ‘B-‘ with Stable#
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