Latest news with #VeraDavesdeSousa
Zawya
16-05-2025
- Business
- Zawya
Angola's debt and economic challenges
NAIROBI/LUANDA: The International Monetary Fund has cut its 2025 growth forecast for Angola to 2.4%, mainly due to concerns about the impact of lower crude oil prices on the government's finances and higher interest rates in global markets. Here is an explanation of Angola's debt and economic challenges: WHY ARE INVESTORS CONCERNED ABOUT ANGOLA? Like other small African economies, the Southern African nation's dollar bonds were pummelled during the market turmoil that followed the imposition of U.S. trade tariffs at the start of April. But concerns rose further in April when JPMorgan demanded additional security of $200 million from the government for its $1 billion financing backed by Angola's dollar bonds. The worries were also fuelled by Angola's heavy exposure to the slide in the price of oil that accompanied the market turmoil. Angola is sub-Saharan Africa's second biggest exporter of crude oil which makes up 95% of exports, contributes 60% of the government's revenues and is estimated to drive three quarters of all economic activities, IMF data showed. The government has used a $70 per barrel assumption in its 2025 budget, but prices fell to as low as $60 during the height of the sell-off. Brent crude was trading at $63.93 on Thursday. All this comes as the government faces external debt repayments of $9.1 billion this year, including a Eurobond maturing in November. WHAT HAS THE GOVERNMENT SAID ABOUT THE CHALLENGES? Finance Minister Vera Daves de Sousa has said the slide in the price of oil has increased the likelihood of the government turning to the IMF for a new loan deal. The ministry of finance has also defended its borrowing leading up to this point, saying loans were used to build hospitals and boost the water supply. The government has said it could review its spending plans if the pressure is sustained, and it will weigh its future debt financing carefully to ensure debt sustainability. Total debt stood at close to 70% of GDP last year and it is projected to keep falling as a proportion of economic output, Angola's debt sustainability analysis shows. However, the IMF classifies it as being at a high risk of distress, mainly due to exposure to foreign exchange risks. About 80% of Angola's debt is in foreign currency, including oil-backed loans from China. The government says it has accelerated repayments to China and can weather the storm from the lower oil prices. Angola lacks a deep local debt market it can turn to when the external financing options become tighter. A push to remove fuel subsidies last year to relieve pressure on finances did not attain the desired savings, the IMF said. WHAT IS THE SOCIAL IMPACT, AND THE GOVERNMENT'S OPTIONS? Angola's spending on social services has shrunk by 55% since 2015 due to the growing debt burden, says Debt Justice, a London-based campaign group. The pressure has also curbed its ability to invest in much-needed infrastructure projects, analysts said. Angola is a key part of a new, U.S.-backed transport corridor called Lobito, linking critical minerals-exporting Democratic Republic of the Congo and Zambia to Angola's Atlantic coast. The government has been holding talks with IMF officials this week, including a meeting between IMF Africa head Abebe Aemro Selassie and Angola's President Joao Lourenco in Luanda. Information on whether Angola is seeking a new lending programme have not been provided yet. (Reporting by Duncan Miriri in Nairobi and Miguel Gomes in Luanda; Editing by Karin Strohecker and Toby Chopra)
Reuters
15-05-2025
- Business
- Reuters
What are the debt challenges facing Angola?
NAIROBI/LUANDA, May 15 (Reuters) - The International Monetary Fund has cut its 2025 growth forecast for Angola to 2.4%, mainly due to concerns about the impact of lower crude oil prices on the government's finances and higher interest rates in global markets. Here is an explanation of Angola's debt and economic challenges: Like other small African economies, the Southern African nation's dollar bonds were pummelled during the market turmoil that followed the imposition of U.S. trade tariffs at the start of April. But concerns rose further in April when JPMorgan demanded additional security of $200 million from the government for its $1 billion financing backed by Angola's dollar bonds. The worries were also fuelled by Angola's heavy exposure to the slide in the price of oil that accompanied the market turmoil. Angola is sub-Saharan Africa's second biggest exporter of crude oil which makes up 95% of exports, contributes 60% of the government's revenues and is estimated to drive three quarters of all economic activities, IMF data showed. The government has used a $70 per barrel assumption in its 2025 budget, but prices fell to as low as $60 during the height of the sell-off. Brent crude was trading at $63.93 on Thursday. All this comes as the government faces external debt repayments of $9.1 billion this year, including a Eurobond maturing in November. Finance Minister Vera Daves de Sousa has said the slide in the price of oil has increased the likelihood of the government turning to the IMF for a new loan deal. The ministry of finance has also defended its borrowing leading up to this point, saying loans were used to build hospitals and boost the water supply. The government has said it could review its spending plans if the pressure is sustained, and it will weigh its future debt financing carefully to ensure debt sustainability. Total debt stood at close to 70% of GDP last year and it is projected to keep falling as a proportion of economic output, Angola's debt sustainability analysis shows. However, the IMF classifies it as being at a high risk of distress, mainly due to exposure to foreign exchange risks. About 80% of Angola's debt is in foreign currency, including oil-backed loans from China. The government says it has accelerated repayments to China and can weather the storm from the lower oil prices. Angola lacks a deep local debt market it can turn to when the external financing options become tighter. A push to remove fuel subsidies last year to relieve pressure on finances did not attain the desired savings, the IMF said. Angola's spending on social services has shrunk by 55% since 2015 due to the growing debt burden, says Debt Justice, a London-based campaign group. The pressure has also curbed its ability to invest in much-needed infrastructure projects, analysts said. Angola is a key part of a new, U.S.-backed transport corridor called Lobito, linking critical minerals-exporting Democratic Republic of the Congo and Zambia to Angola's Atlantic coast. The government has been holding talks with IMF officials this week, including a meeting between IMF Africa head Abebe Aemro Selassie and Angola's President Joao Lourenco in Luanda. Information on whether Angola is seeking a new lending programme have not been provided yet.
TimesLIVE
05-05-2025
- Business
- TimesLIVE
International Monetary Fund team to visit Angola this week
A team of officials from the International Monetary Fund (IMF) will visit Angola this week, it said, as the country edges closer to a new loan deal with the lender due to pressure after the slide in crude oil prices. The southern African nation, which is sub-Saharan Africa's second-biggest crude oil exporter, had to pay $200m (R3.67bn) last month after JPMorgan demanded more security for its Total Return Swap, a loan backed by Angola's dollar bonds. The IMF did not immediately provide more details on the mission to Angola and the expected outcomes. Finance minister Vera Daves de Sousa told Reuters the drop in oil prices had made a new loan deal with the IMF more likely, adding the government was studying the potential full impact on its finances.
Reuters
05-05-2025
- Business
- Reuters
International Monetary Fund team to visit Angola this week
NAIROBI, May 5 (Reuters) - A team of officials from the International Monetary Fund will visit Angola this week, the IMF said, as the country edges closer to a new loan deal with the lender due to pressure following the slide in crude oil prices. The southern African nation, which is Sub-Saharan Africa's second-biggest crude oil exporter, had to pay $200 million last month after JPMorgan demanded more security for its Total Return Swap, a loan backed by Angola's dollar bonds. The IMF did not immediately provide more details on the mission to Angola and the expected outcomes. Finance Minister Vera Daves de Sousa told Reuters that the drop in oil prices had made a new loan deal with the IMF more likely, adding that the government was studying the potential full impact on its finances.
TimesLIVE
29-04-2025
- Business
- TimesLIVE
Will Africa's financial stability fund rise to the debt challenge?
Angola will use its chairmanship of the African Union (AU) this year to advance the creation of a continental financial stability mechanism, its finance minister says, to cushion economies from sliding into a liquidity crisis due to external debt repayments. Here are some key aspects of the proposed African Financing Stability Mechanism (AFSM): Why are African leaders creating the AFSM? With public debt soaring 170% in the past 15 years to more than $1.8-trillion (R33.36-trillion), the 54-nation continent faces heightened external refinancing risks that could morph into a liquidity crisis. Debt repayments, which the African Development Bank (AfDB) estimates at $10bn (R185.32bn) annually between now and 2033, come as the region faces slower economic growth, exchange rate volatility and dwindling aid. Angola took over the rotating chairmanship of the AU in February, and finance minister Vera Daves de Sousa said on Friday the AFSM would be a priority to galvanise funds from regional institutions to deal with the debt burden. All this happens against the backdrop of US President Donald Trump's tariffs sparking market turmoil and a sell-off in risky assets, sending borrowing costs higher and potentially limiting market access for smaller, riskier economies — so-called frontier markets — many of which are in Africa. How will it work? The AfDB, the continent's multilateral development bank, will play a key role though it is unclear whether the mechanism will be hosted within the lender or as a separate entity. Next steps include establishing a legal treaty to govern the facility, African officials said. Modelled on the European Stability Mechanism (ESM), the AFSM is designed to save countries in the region about $20bn (R370.65bn )in debt servicing costs in the next 10 years, the AfDB estimates.
