Strong demand in Angola´s latest Eurobond issue shows that the country “clearly remains on investors’ radar screens when looking at Sub-Saharan Africa”, according to Eaglestone Securities.
“Overall, Angola is currently on a much better trajectory than it was prior to the start of IMF program. The impact of the Covid-19 pandemic has diminished thanks to the gradual lifting of containment measures and the contribution from higher oil prices”, the Lisbon-based consultancy says in its recent analysis of the country´s bond auction.
“Growth in the non-oil sector has shown clear signs of recovery and is likely to contribute further to the country’s economic growth over the medium to long-term”, it adds.
According to Eaglestone, the continued implementation of growth-enhancing structural reforms “remains crucial as does fiscal consolidation to lower public debt levels”. The latest upgrades from the ratings agencies reflect the country’s improved situation, while the “strong demand in the latest Eurobond issue shows that Angola clearly remains on investors’ radar screens when looking at Sub-Saharan Africa”.
Angola raised USD 1.75 billion in overseas markets this month following three other Eurobond issues in 2015, 2018 and 2019. The government said that USD 750 million of the proceeds from this debt sale will be used to buyback existing Eurobonds due in 2025 and 2028 and the remainder to finance its budget.
Angola’s 10-year debt operation was priced at 8.75%, which is reportedly less than initial guidance, and was more than two-times oversubscribed. Also, the amount raised was lower than the projected figure of around USD 2.8 billion announced earlier this year by the government in its annual debt issuance plan.
According to Eaglestone, Angola could go back to the Eurobond market this year, but only after the general elections scheduled to take place in August.
This Eurobond issue follows the conclusion of Angola’s three-year economic and financial assistance program with the IMF in December 2021. Total disbursements in the program amounted to about USD 4.5 billion.
“We believe the IMF program was largely successful in improving Angola’s economic and fiscal situation”, Eaglestone adds. After a fiveyear recession (2016-20), real GDP in the country advanced by a modest 0.7% in 2021 (from a contraction of -5.6% in 2020) and is expected to expand by 2.5-3.0% this year.
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Angola´s public debt levels also came down significantly to a level close to 80% of GDP in 2021 (vs. about 130% of GDP in the previous year). Higher oil prices also helped improve the country’s external accounts and stabilize the kwanza (about 70% of total public debt is denominated in foreign currency).
Angola’s latest achievements triggered the three main ratings agencies to upgrade their long-term credit ratings of the country in recent months. Moody’s was the first to upgrade by lifting its rating to “B3” from “Caa1” and maintain a “stable” outlook in September 2021. Already this year, Fitch upgraded Angola’s rating to “B-” from “CCC”, while S&P’s lifted its rating to “B-” from “CCC+”.
Both agencies also kept a “stable” outlook on the country’s debt. The ratings agencies said their decision was driven by their assessment that Angola’s fiscal metrics as well as its liquidity and funding risks were likely to improve. “This view is supported by the recovery in oil prices and a stable exchange rate, which will allow the positive impact of the
government’s fiscal consolidation efforts and structural improvement in debt and public finance management to be reflected in a lower public debt burden”, the consultancy adds.
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