Angola’s improved credit rating shows “confidence” in the economy

26 September 2011

London, United Kingdom, 26 Sept – The improved credit rating given to Angola by the three international ratings agencies, in all cases with a stable outlook, shows confidence in the country’s economy, according to the Economist Intelligence Unit (EIU), of The Economist group.

In July, Standard & Poor’s increased its rating on Angola from “B+” to “BB-“, with a stable outlook, placing Angola “ahead of many of its regional peers, including Nigeria,” noted the EIU in its latest report on the Angolan economy.

Moody’s, in May, and Fitch Ratings, in June, also increased their rating on the quality of Angola’s debt, which “reflects confidence in Angola’s capacity to sustain a solid macroeconomic performance.”

This, the EIU analysts said, despite the country’s continued dependence on the oil sector to generate wealth.

According to the EIU, the three agencies were particularly encouraged by the positive assessment from the International Monetary Fund (IMF), as part of the process that goes along with its financing agreement with Angola, worth US$1.4 billion.

Another important factor was the progress made by the government in paying off its accumulated debts to construction companies in 2008 and 2009 when a drop in oil prices led to budget constraints for the Angolan government.

“The stable outlook given by the three agencies means that it is unlikely there will be a change in rating in the near future,” the report said.

Despite the improved ratings, the EIU said that the Angolan government had backed away from its plans to issue euro-bonds totalling US$500 million.

The EIU cited the head of the Civil House of the Presidency, Carlos Feijó, as saying that the Treasury no longer needed the funds.

The Angolan economy is expected to post growth of 7.6 percent this year, which is almost double the 3.4 percent posted last year.

Acceleration of growth is expected to continue into 2012 when growth should reach 10.3 percent, according to the EIU figures.

Investors are eagerly awaiting the new mining code, which is due to come into force at the end of the year and updates a previous code dating back to 1992.

“The new code aims to encourage more intensive exploration of the country’s rich mining potential. Angola has significant deposits of iron and copper, as well as large diamond reserves,” said the EIU analysts.

The attention of the authorities over the last few years has been focused on development of the oil sector, but reconstruction of roads and railways in the country’s interior have, “improved the viability of the mining industry, which has also benefited from high global prices.”

The law outlines that state concession-holder Endiama hold a minimum 51 percent stake in all diamond mines and that state companies remain responsible for granting mining licenses.

Illegal mining, carried out in provinces rich in diamonds in the north of the country, will now be considered a crime against the State.

“By boosting the mining industry, the government hopes to deal with one of the concerns shown by the IMF; that the country is too dependent on the oil sector,” the report said. (macauhub)