Angola Eyes Return to Eurobond Market to Help Fund Budget Gap

(Bloomberg) -- Angola will tap international bond markets to help finance its budget for this year and 2020 and is working with banks to gauge the appetite for issuance.

While the government hasn’t yet decided on the amount that it will issue or the exact timing “we decided that we will go” to the market, Finance Minister Vera Daves de Sousa said Friday in an interview at the annual meetings of the International Monetary Fund and World Bank in Washington D.C. This is in line with Angola’s long-term strategy of re-profiling its debt to have longer maturities and reduce short-term repayment pressure.

The IMF approved a $3.7 billion loan program for Angola in December. It projects Angola’s debt at 91% of gross domestic product for the year, compared with an initial estimate of 74% under the Extended Fund Facility, and warned in January that the government should be “extremely careful” about further borrowing.

“We are also trying to understand with the banks what the appetite of the market is, but respecting the limit we agreed on with the IMF,” Daves DE Sousa said. “We want to make sure that we follow a very conservative and secure way and the strategy will be in alignment with the IMF. We are under a program, we cannot do something just because we want to.”

Angola last tapped international markets in May 2018, when it raised $1.75 billion in 30-year securities paying 9.375%. The yield has climbed about 60 basis points from a record low in July to 8.85% on Friday. The country’s dollar bonds have lost 0.5% since the end of June, the worst performance out of 17 sub-Saharan African sovereigns with Eurobonds, according to data compiled by Bloomberg.

Angola received the second disbursement of about $248 million from the IMF in June, which brought the total to about $1.24 billion. The lender said at the time while the country’s debt is assessed as sustainable, there is little room to accommodate large shocks beyond the program’s projections. The economy of Africa’ second-largest oil producer contracted for the past four years and the higher debt ratio is largely explained by the lower nominal GDP, additional borrowing to close fiscal financing gaps, and currency depreciation, the IMF said.

The program is “good for us, it makes us disciplined and makes sure that the results that will come from this issuance will be effective,” Daves De Sousa said.

He also said that Angola and the IMF have agreed that the oil producer won’t scrap fuel subsidies before a new cash-transfer program is in place to protect vulnerable households from the impact of higher prices.

--With assistance from Candido Mendes and Henrique Almeida.

To contact the reporter on this story: Rene Vollgraaff in Johannesburg at rvollgraaff@bloomberg.net

To contact the editors responsible for this story: Benjamin Harvey at bharvey11@bloomberg.net, Robert Brand, John Viljoen

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