Moody’s Investors Service had just upgraded the Government of Angola’s foreign and local currency long-term issuer rater from Caa1 to B3 while maintaining a stable outlook for the country.
Moody’s upgrade follows the improvement of Angola’s credit profile on the back of stronger governance and better fiscal management. In particular, Moody’s expects a continued improvement in the country’s fiscal metrics and liquidity and funding risks, especially because of higher oil prices and a stable exchange rate with the Kwanza. As a result, Angola’s local currency (LC) and foreign currency (FC) country ceilings have been raised to B1 and B3 from B2 and Caa1 respectively.
“Assuming that oil prices remain around $65/barrel this year and next and around $45-65/barrel in the medium term, with a relatively stable kwanza, Moody’s expects the government debt-to-GDP ratio to decline to 95% this year and below 80% in 2023, from 122% in 2020,” Moody’s said in a statement yesterday. The company further expects the debt-to-GDP ratio to approach 60% by 2025 while the debt-to-revenue ratio could fall to around 300% from 586% last year.
A positive improvement is notably seen in the country’s liquidity risks. While Angola’s government borrowing requirements rose to almost 18% of GDP in 2020, they are expected to go down to below 10% of GDP in 2021 and 2022. This is notably the result of continued debt restructuring efforts along with fiscal consolidation.
Finally, the country’s external position can now rely on the stabilization of its exchange rate, with the Kwanza relatively stable at AOA 650/USD since the end of 2020 compared with AOA 165/USD at the end of 2017. While the exchange rate’s liberalization has been an eventful journey, the currency is stabilizing as oil prices recover, which in turns improves Angola’s external position.
“Moody’s expects the current account surplus to exceed 5% of GDP in 2021 and to remain in surplus in the coming years. This is explained in part by the rebound in oil prices but also by the structural reduction in the import bill,” explains.