Angola Owes $5 Billion to Firms, Plans Eurobond Sale in 2018

(Bloomberg) -- Angola owes more than 1 trillion kwanza ($5 billion) to companies in Africa’s second-biggest oil producer and may sell an international bond this year, according to its Macroeconomic Stabilization Plan.

President Joao Lourenco’s government is seeking to settle the unpaid invoices by 2019, according to the document seen by Bloomberg. The arrears relate to costs incurred in the country between 2014 and 2016, it showed.

“The payment of these arrears, after being verified and validated, is a priority,” according to the plan. “That payment is not only a right for the creditor companies, but will also represent a positive and stimulating factor for the economy.”

Angola’s economy has been hit by low crude oil prices, soaring inflation and a shortage of dollars needed to import products. It’s expected to expand 4.9 percent this year, accelerating from 1.1 percent growth in 2017. The third-biggest economy in sub-Saharan Africa posted zero growth in 2016 -- its worst performance in more than a decade. The state has devalued the kwanza against the dollar twice this year after scrapping a peg, in a bid to boost the battered economy.

Angola Owes $5 Billion to Firms, Plans Eurobond Sale in 2018

Rising oil prices could help Angola pay these arrears, said Tiago Dionisio, a Lisbon-based analyst for Eaglestone Advisory SA. Angola, which depends on crude for more than 90 percent of its exports, forecasts a $50 a barrel average price in its 2018 budget report. Brent crude closed above $70 a barrel for the first time in three years on Monday.

"It won’t happen from one day to the next, but authorities in Angola know that settling the late payments to suppliers will help the overall economy," Dionisio said.

Non-Registered Debt

The drop in oil prices, which began in 2014, boosted Angola’s borrowing needs. Total debt rose to 12.5 trillion kwanzas in June 2017 from 5.9 trillion kwanzas in 2014. The debt-to-GDP ratio increased to 61.2 percent in June compared to 46.6 percent in 2014.

“The debt’s trajectory is currently crossing the limit of its sustainability,” the government said in the macroeconomic plan for 2017 and 2018. “All the necessary efforts should be developed to keep it sustainable.”

Under the proposal, the government will cut spending and negotiate the maturities of its bilateral debt with its main partners during the first half of this year. The Finance Ministry is also seeking to confirm Angola’s “non-registered debt,” according to the document.

Angola plans to complete all necessary steps to sell Eurobonds before the end of June. Dionisio, the Eaglestone analyst, said in a research report in December he expects Angola to issue a $2 billion bond in February.

©2018 Bloomberg L.P.