Angolan public finances remain under pressure, despite improvements in the oil market and the country’s economic diversification efforts, with funding from China to remain key source of funding, according to Angolan economist Alves da Rocha.
Speaking on 13 January in Lisbon at a conference organised by the Africa Intelligence Monitor and the AIP Foundation, the economist from the Catholic University of Angola stressed that GDP growth rates expected until 2022 are “low” when compared with the 2002-2008 period – the “mini-golden age of the Angolan economic growth,” an annual average rate of 11% – and state revenues will remain under pressure in the period.
“Except for the cases of China, possibly except in the case of Brazil, from which the authorities have called for a review of financial relations with the release of closed credit lines (…) we have this problem of obtaining external financing, with interest rates that the country is able to pay afterwards,” he said.
Budget deficits, he added, will have to be financed by creating public debt, subscribed mainly by banks and large companies, and foreign debt, in this case “led by China through the credit lines that have recently increased,” with a new line worth almost US$9 billion.
State debt is expected to reach 75% to 80% of GDP at the end of the year, excluding public enterprises, among which the “big question is Sonangol,” a state oil company that is undergoing restructuring with debts of about US$9 billion, which there has been “an attempt to cover with the support of China,” worth about US$5 billion, which did not materialise.
The latest edition of the Africa Intelligence Monitor claims the impact on Sonangol’s revenues is limited – particularly for relieving current oil liquidity constraints – due to the current price of Brent crude oil rising to about $ 55, after production cuts by the Organization of Petroleum Exporting Countries (OPEC).
The limitations, AIM said in an article published on 12 January on the outlook for the oil sector, are the result of downward pressures on prices, which are preventing prices from climbing to US$60 per barrel, which is considered to be the minimum level for the oil company to have some room to manouevre and also for payments in oil credits already incurred, in particular with China.
The 2017 State Budget, the year of general elections in Angola, was drawn up based on a value of US$46 per barrel and expected oil production of 1.8 million barrels per day.
The Economist Intelligence Unit reported that China “will continue to be an extremely important partner” for Angola, in the current economic and financial context.
“The government will continue to seek out China’s loans to allow it to continue with much needed capital expenditure programmes – building roads and power plants, for example,” the EIU said in one of its recent reports on Angola.
Other sources of funding for the Angolan State include international financial institutions credit facilities and soft loans from the African Development Bank, as the use of eurobonds market is “unlikely in the short and medium term,” it said. (macauhub)