Angola: More than US$1 billion from China to fund reconstruction

9 February 2009

Luanda, Angola, 9 Feb – Angola, dealing with a sharp fall in revenue in 2009 due to the decline in oil prices, should receive at least a further US$ 1 billion of credit from China to support the country’s reconstruction.

Backing for the increase in credit to Angola, currently standing at about US$5 billion, via Eximbank, was given in December 2008, during Angolan president Jose Eduardo dos Santos’ second visit to China in five months.

The Economist Intelligence Unit (EIU) had already reported that the additional amount was around US$1 billion in January and last week a source close to the Angolan Ministry of Finance confirmed this figure to news agency, Reuters.

Finance minister, Severim de Morais, travelled to China last week to arrange “the final details of the loan.”

The Angolan Ministry of Finance has signed three credit agreements with Eximbank, to the value of US$2 billion (March 2004), US$500 million (July 2007) and over US$2 billion (September 2007) which have supported reconstruction projects in the areas of transport, education and health.

Under the second phase of the credit line, Luanda has seen funding of over US1.6 billion approved, according to recently released official figures.

This is in addition to the funding via the China International Fund (CIF), up to an expected maximum of US$2.9 billion.

The EIU said that the available official credit line, estimated at US$5 billion “is practically used up.”

It was this factor, coupled with an internal “funding crisis” as a result of a “halving of oil revenue in 2009,” that led the Angolan president to go to Beijing at the end of last year, said the British study centre in its latest report on Angola.

“The impact of the funding crisis is already reflected in the level of currency reserves; after reaching a maximum of US$19.8 billion in October, it fell to US$18.9 billion in November, the first fall in almost four years,” it said.

It added that this fall reflects the efforts of the Banco Nacional de Angola to maintain the value of the kwanza, indexed to the North American dollar, the designated currency for imports – a policy which helps to contain the cost of imports and control inflation, which is above double figures, though this seems unsustainable in the current situation.

“After five years of sustained economic growth, facilitated by the rise in oil production, record global prices and a significant stream of foreign investment, Angola’s expansion is now under threat. Ironically, at the root of the fall is the very source of Angolan wealth: its substantial oil exports,” says the EIU.

The Angolan government has already made it clear that this year’s investment plan – estimated at US$42 billion – will be scaled down and the president and the prime minister have publicly emphasized the need for greater “austerity” and “selectivity” for future projects. (macauhub)