Angola readying first trip to borrowing markets since IMF deal

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Angola is readying a return to bond markets after securing an IMF deal and hopes to kick-off a three-year privatisation programme this year, Treasury Secretary Vera Daves told Reuters on Monday.


Angola, Africa’s second-largest oil producer, secured $3.7 billion of International Monetary Fund aid in December having been pushed towards an economic crisis by the fall in crude prices since mid-2014.

Its currency, the kwanza, dropped more than 40 percent last year making it the second worst performing in the world after Argentina’s peso, while its debts jumped and international reserves fell to a seven-year low of $11.1 billion in December.

Daves said the country had financing needs of around 3.5 trillion kwanza ($11.32 billion) this year compared to the nearly 5 trillion kwanza it spent in 2018, and was hoping to tap international markets to secure some of the money.

“We are ready because we have been through the procedure recently,” she told Reuters in an interview. Angola sold a $1.75 billion 10-year bond at a yield of 8.25 percent last year.


Asked how soon it could happen, she said it would depend on investor appetite. “Probably next month we will have a better idea,” Daves said, adding that “hopefully” it would be a 10-year bond. “We are always trying to elongate our debt maturities.”

President João Lourenço, who took over in September 2017 after 38 years of rule by José Eduardo dos Santos, has said he wants to revive Angola’s fortunes by tackling corruption, opening it up to foreign investment and diversifying away from oil, which accounts for more than 90 percent of exports.

The IMF programme is aimed at bringing stability to the country and fostering a return of economic growth, especially in the second half of the year, when Daves expects an expansion of around 2.8 percent.

It could struggle to reach that if oil stays below the $68 a barrel the Treasury had as its average forecast for the year.


It could also require more budget cuts by the government, although education and healthcare spending as well as key infrastructure projects needed to be protected, Daves said.

PRIVATISATION PLANS

Privatisation is also part of the country’s plans and the IMF’s. Banks, oil and mining firms, telecoms and agriculture companies are all on what is likely to be a “staggered” agenda over three years.

“Hopefully we will see the first ones this year,” Daves added. A bank will “probably be first because they have history of reporting,” which makes the privatisation process easier.


Angola’s depleted foreign exchange reserves remain a problem and can’t afford to go much lower, Daves acknowledged.

The country scrapped the kwanza’s peg to the dollar at the start of last year, but reserves have continued to fall as the central bank has gradually worked through a backlog of what were effectively unpaid bills.

Daves estimated that around 1.2 trillion kwanza ($3.88 billion) was still snarled up, although around 300 billion kwanza of that was still being scrutinised.

She also expects the central bank to announce far-reaching changes to try and prevent backlogs building up in the future.


“They (the central bank) want to change foreign exchange law and create a buffer,” and make it easier to move money in and out of Angola, she said.

“I know they want to come in first semester and come with very clear proposal on this,” she said, but did not have more details.