London, United Kingdom, 7 March – The rise in the price of oil and what is considered to be “prudent” macroeconomic management have made it possible for Angola to make budgetary and external accounts improvements, which has led credit rating agency Moody’s to increase it’s rating on Angola’s debt.
In a report published last week, Moody’s noted that both Angola’s budgetary and external accounts had both climbed out of a deficit in 2009 into a surplus in 2010, respectively of 7.5 percent and 2.6 percent of gross domestic product (GDP).
“The revised rating will focus on the fact that improvements in the budgetary and external metrics are sustainable in the medium terms,” the agency said.
Other key factors are the payment of accumulated domestic debts during the financial crisis and the application of structural elements in line with the agreement between Angola and the International Monetary Fund (IMF), particularly those related to Angola’s budgetary framework.
Both accounts, “have been boosted by the recovery of oil prices in 2010 and by prudent macroeconomic management followed by the authorities,” the report said.
According to Moody´s, due to an improvement in budgetary conditions, the Angolan authorities are expected, by March, to have paid off all domestic debts accumulated due to the collapse of oil prices at the beginning of the global financial crisis.
At their highest point, in August of last year, these debts totalled US$6.8 billion, and the government has so far paid off around 50 percent of the total.
According to Moody´s, the introduction of reforms related to the stand-by agreement with the IMF is positive for Angola’s credit.
Amongst these reforms are the creation of a debt management agency and measures to increase budgetary transparency.
“If they are successful, these reforms will improve Angola’s institutional strength, which is a key figure for Moody’s evaluation in relation to the quality of a country’s credit,” it said.
The review of the rating, with a positive outlook, is expected to take around three months, according to the agency.
In May of last year, Moody’s gave Angola’s sovereign debt bonds a rating of “B1” with a positive outlook.
Projections of economic growth for Angola this year vary between 6.9 percent from BPI bank, a rate three times greater than last year, 7.5 percent from the IMF and 7.6 percent from the government.
It is hoped that growth will be supported by a recovery of the non-oil sector, driven by investments in infrastructure, particularly the private sector.
The non-oil sector is this year expected to see growth of 10 percent, gradually increasing its contribution to Angola’s GDP.
Based on average production of 1.9 million barrels of oil per day, above the 1.86 million set in 2010, the oil sector is expected to post growth of 2.2 percent. (macauhub)