fitch angola rating report may 2010
TRANSCRIPT
Sovereigns
www.fitchratings.com 19May 2010
Full Rating Report Angola
Rating Rationale • Angola’s ratings are supported by the country’s substantial natural resources
endowment and a strong growth record since the 27‐year civil war ended in 2002. Growth, in turn, has been driven by investment in infrastructure and the oil sector, rising oil production and improved macroeconomic stability. Investment has been funded by the government’s own financial resources and borrowing. Nonetheless, public and external debt ratios remain moderate. These strengths are counter‐balanced by considerable challenges in terms of addressing the infrastructure deficiency, strengthening institutions to mitigate the impact of future oil price shocks and improving the effectiveness of government in services delivery and efforts to foster economic diversification and development.
• Angola’s real GDP growth of 13.4% on average since the war ended (2003‐2009) is the second‐strongest of all Fitch‐rated countries after Azerbaijan (‘BB+’; 17.7% in 2003‐2009). Following a brief interruption in 2009 when growth slowed to 2.7% due to the oil price shock, the growth trend is expected to resume from 2010. Inflation fell from over 100% in 2004 to low double digits since 2006. Supply‐side bottlenecks need to be addressed sufficiently before inflation can fall much further. Dollarisation also remains high.
• Oil output doubled from 940,000 barrels/day (b/d) in 2003 to 1.9 million b/d in 2009. The sector is well managed, resulting in strong ongoing investment. Angola’s huge oil wealth is a fundamental rating strength but the way this is managed to benefit the broader population will determine the extent of rating improvement.
• Rising oil prices and production resulted in strong fiscal and current account surpluses in 2004‐2008. These moved into large deficit in 2009 due to the collapse in oil prices combined with expansionary fiscal policy. Fitch forecasts them to move back into surplus from 2010 due to tighter fiscal policy and higher oil prices. These trends have helped keep public and external debt ratios moderate despite considerable borrowing for infrastructure. Angola agreed a settlement of its Paris Club arrears in 2006 and paid a final instalment in 2010. Debt to private creditors has been serviced on time. Domestic debt structure worsened last year but is now improving.
• The oil price shock highlighted the need for reforms in macro management. Macro instability re‐emerged in 2009; defence of the currency by selling FX reserves and rationing FX was unsuccessful. The exchange rate was finally re‐ liberalised in October 2009, resulting in a 19% depreciation for the full year. In Q110, the currency continued an orderly depreciation but the parallel exchange rate appreciated and converged. Reforms have been anchored by an IMF Stand‐ By Agreement since November 2009. The first review was completed in May.
• Compared with rating peers, it will be much more challenging for Angola to address social development and other areas such as the skills gap, as the war has left a legacy of lack of investment in human capital.
What Could Trigger an Upgrade? • The Positive Outlook reflects Fitch’s view that the implementation of IMF‐
supported reforms will embed macro stabilisation, improve financial management and transparency, mitigate the impact of oil price volatility, and strengthen public and external balance sheets.
Ratings
Foreign Currency Long‐Term IDR B+ Short‐Term IDR B
Local Currency Long‐Term IDR B+
Country Ceiling B+
Outlooks Foreign‐Currency Long‐Term IDR Positive Local‐Currency Long‐Term IDR Positive
Financial Data
Angola (USDbn) 2009
GDP 71.8 GDP per head (USD 000) 3.9 Population (m) 18.6 International reserves 13.6 Net external debt (% GDP) ‐12.7 Central government total debt (% GDP)
31.0
CG foreign‐currency debt 27.6 CG domestically issued debt (AOAbn)
1.0
Analysts
Veronica Kalema +44 20 7417 6336 [email protected]
Richard Fox +44 20 7417 4357 [email protected]
Related Research
Applicable Criteria • Sovereign Rating Methodology
(October 2009) Other Research • Global Economic Outlook (April 2010) • Sovereign Review and Outlook
(December 2009)
Sovereigns
Angola May 2010 2
Peer Comparison
Net External Debt % of CXR
40
20
0
20
40
60
80
100
120
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010f
2011f
Current Account Balance % of GDP
40
30
20
10
0
10
20
30
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010f
2011f
General Government Debt % of GDP
0
10
20
30
40
50
60
70
80
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010f
2011f
General Government Balance % of GDP
15
10
5
0
5
10
15
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010f
2011f
International Liquidity Ratio, 2009 %
0 200 400 600 800
Ghana (B+)
Venezuela (B+)
Median (BB)
Median (B)
Angola (B+)
Gabonese Republic (BB)
Nigeria (BB)
GDP per capita Income, 2009e
0 10 20 30 40
Angola (B+)
Venezuela (B+)
Ghana (B+)
Nigeria (BB)
Median (B)
Median (BB)
Gabonese Republic (BB)
Angola Medians
At market exchange rates, USA = 100
Sovereigns
Angola May 2010 3
Rating Factors
Summary: Strengths and Weaknesses Rating factor Macroeconomic Public finances External finances Structural issues Status Neutral Neutral Strength Weakness Trend Positive Stable Stable Positive
Note: Relative to ‘B’ categories Source: Fitch
Strengths • Angola has huge natural resources wealth: it is the world’s 12th‐largest oil
producer and fourth‐largest diamond producer and there are substantial deposits of other minerals which are mined on a small scale or not yet exploited. Arable land is abundant, although some of it still needs to be de‐ mined.
• Very strong growth rates in recent years reflect rising investment in the oil sector and infrastructure, high oil prices and improved macroeconomic stability. After a brief interruption in 2009, Fitch expects this trend to resume.
• Public debt ratios are moderate despite strong borrowing. Recent large fiscal surpluses and strong growth made for very positive debt dynamics. Reforms anchored by the IMF programme will help improve macro stability, make public finances more resilient to oil price shocks and develop a longer track record of sound financial and debt management.
• Gross external debt is moderate compared with rating peers, helped by strong growth in current external receipts (CXR) and GDP. External debt service ratios have fallen since 2007 to below the 10‐year peer group median. The country became a net external creditor in 2006.
Weaknesses • The monetary and exchange rate framework is weak and underdeveloped.
Inflation and dollarisation remain relatively high.
• In 2009, oil and liquefied petroleum gas (LPG) accounted for around 43% of output, 63% of government revenue and 98% of merchandise exports. The economy is therefore exposed to oil price volatility.
• Governance, institutions, social indicators and human capacity are weak compared with peers, reflecting in part the legacy of the 1975‐2002 civil war.
• The business environment is weak. Although the Angolan government has moved quickly to address the infrastructure deficiency, there is still much more to be done and structural reforms are needed to reduce excessive bureaucracy and other regulatory constraints. The skills deficiency is a longer‐term challenge.
Local‐Currency Rating The Foreign‐Currency and Local‐Currency Long‐Term IDRs are the same. Although the domestic debt market accounted for 58% of public debt in 2009, it is still under‐ developed and is not a reliable source of financing. Also, most domestic debt is denominated in or indexed to foreign currency or CPI, reflecting years of macro instability. As such, Fitch views the chances of prioritising domestic over foreign debt repayments as small.
Country Ceiling The Country Ceiling is the same as the Foreign‐Currency Long‐Term IDR. Since 1999, Angola has been gradually liberalising the current account, but in 2009 administrative controls were temporarily returned for some current account transactions. It still has administrative restrictions on capital account transactions.
Peer Group Rating Country BB Costa Rica
El Salvador Philippines
BB‐ Armenia Gabon Lesotho Nigeria Serbia Uruguay Vietnam
B+ Angola Cape Verde Georgia Ghana Kenya Sri Lanka Venezuela
Rating History
Date
Long‐Term Foreign Currency
Long‐Term Local Currency
19 May 2010
B+ B+
Sovereigns
Angola May 2010 4
Outlook and Key Issues The 27‐year civil war ended in 2002. In 2004‐2008, the government implemented an extensive infrastructure programme, achieved very strong economic growth averaging 17.5%, reduced inflation to low double digits, stabilised the currency, and achieved large fiscal and current account surpluses and an accumulation of reserves. Rising oil prices enabled the government to pay off most of its Paris Club debt arrears in 2006 and 2007, a process completed in 2010. The government received virtually no external assistance in the form of either grants or debt relief (only USD400m of penalties were forgiven). Public debt has since risen to finance the infrastructure spend and for liquidity management by the central bank (BNA), but remained moderate at the end of 2008 at 25.5% of GDP and less than the peer group median of 33.7% of GDP.
The collapse in oil prices in H208‐Q109 interrupted this impressive performance. In 2009, growth slowed to 2.7%, macroeconomic instability re‐emerged, and the fiscal and current accounts moved into large deficits despite significant cuts in government expenditure. USD6bn of reserves were drawn down to finance the deficit and defend the currency, and contractor arrears increased sharply. The situation started to stabilise in Q409 following the sustained recovery in oil prices and re‐liberalisation of the exchange rate. An IMF Stand‐By Agreement was finalised in November 2009 and was also supportive.
In 2010, Angola faces a more favourable environment in terms of oil prices and the easing of the global downturn, while the IMF programme will support and anchor reforms on public finances and monetary and exchange rate policy, which will help mitigate the impact of future oil price shocks. Growth is estimated by the government to recover to 8.5%, the budget deficit to narrow to 2.6% of GDP (based on a conservative budget oil price assumption of USD58/b) and reserves accumulation to resume. However, infrastructure deficiencies, weaknesses in financial and macro management, poor governance and business climate remain formidable challenges.
Public Finances Government oil revenue comprises taxes directly from international oil companies (IOCs; roughly 50%) and through the state oil company Sonangol in the form of profit oil, signature bonuses and net profit tax. In 2009, there was a 60% fall in oil revenue to USD14.7bn (or 63% of total revenue) from USD35bn in 2008 (81% of total). In 2002‐2008, oil revenue accounted for 75%‐81% of government revenue.
The severity of the deterioration of the public finances in 2009 was exacerbated by the fact that the original 2009 budget was already expansionary: it had an oil price assumption of USD55/b and deficit projection of 7% of GDP. As oil prices fell, a supplementary budget in July cut the oil price assumption to USD37/b and the deficit projection rose to 15% of GDP. The final outcome was better: a deficit of 9.1% of GDP, due to an average oil export price of USD57/b, although oil production was also down due to the OPEC quota cut. The big cuts in expenditure (compared with the original budget) were on goods and services and capital spending.
The government intended to finance the increased deficit mainly domestically — drawing down large government deposits and increasing borrowing — and externally, mainly through project finance. However, as oil prices were well below the budget assumption for the first half of the year, the government quickly ran into problems financing a wider deficit. In particular, the government could only raise about half (USD4.3bn) of what was needed from the domestic debt market as fixed (non‐market determined) interest rates and increasing macroeconomic instability decreased the attractiveness of longer‐dated debt. Meanwhile, external financing draws down on credit lines linked to projects and could not be accelerated. As such, the government incurred substantial contractor arrears (USD5.1bn or 7.1% of GDP). Net arrears (excluding Sonangol receivables and the
Sovereigns
Angola May 2010 5
final Paris Club penalty arrears payment) were USD3.4bn (4.7% of GDP), just slightly lower than in 2008 (5.5% of GDP). Of these, gross operational arrears were USD1.4bn. 1
Contractor arrears accrued due to the shortfall of funding from the domestic debt market and to procedural delays in financing through some credit lines. They are resulting in layoffs in the construction sector and a squeeze on liquidity and general economic activity. The government expects to pay them from cash balances (USD1.5bn), receivables (taxes due from Sonangol, USD2.6bn). For the rest (USD1bn), it has the options of securitising part of the debt, domestic loan facilities worth USD500m and access to Chinese credit lines, which became operational in 2010. The government expects contractor arrears to be cleared by the end of H110.
The 2010 budget uses an oil price assumption of USD58/b, giving a deficit of 2.6% of GDP. Spending rises by just 5% in nominal terms. Further cuts will be made on goods and services spending by improving the procurement process under a centralised procurement project and by cutting overheads. The government also plans to phase in deregulation of the fuel sector over three years and implement tax policy and administration reforms to raise non‐oil revenue and broaden the tax base. Capital spending is projected to be USD8.3bn (10.2% of GDP), down from USD11.3bn (13.1% of GDP) in 2009. There will be an increase in wages and salaries by 31% in nominal terms due to a substantial increase of health workers and teachers on the government’s payroll.
In terms of principles guiding expenditure, the government looks at having a surplus of current revenue over current expenditure. However, this still results in very pro‐ cyclical budgeting. The IMF programme is targeting an eventual reduction in the non‐oil primary deficit/non‐oil GDP ratio to 25%. It dropped from 75% in 2008 to a projected 39% in 2010.
Given a Fitch oil price forecast of USD80/b, Angola should achieve an overall surplus of around 6% of GDP. The government’s planned deficit (at budget oil prices) will be financed solely by drawing down external credit lines. Proceeds from a planned Eurobond will be used for balance‐of‐payments support.
Public Debt Management Headline debt ratios are moderate, compare favourably with the ‘BB’/‘B’‐range medians and support the rating. However, the debt structure deteriorated last year and due to a large draw‐down of deposits to finance last year’s deficit, the net public debt/GDP ratio rose from 8% of GDP in 2008 to 23% in 2009. 2009 cash balances were USD6.3bn. Unlike a number of oil producers, Angola has not put savings into an oil stabilisation fund. The government is, however, looking into the mechanics of a sovereign‐wealth fund which will serve the role of a fund for future generations.
The domestic debt market is under‐developed and is not yet a reliable source of financing for the government. Domestic debt comprises short‐term central bank bills for liquidity management and government bonds issued to clear supplier arrears and finance projects, although in 2009 treasury bill and bond issuance was to finance the deficit. Treasury bills were introduced in August 2003 and BNA bills in 1999. Most of the debt outstanding is in the form of foreign‐currency and foreign‐ indexed bonds and CPI‐indexed bonds.
Domestic debt rose from the equivalent of USD0.6bn in 2004 to USD11.5bn in 2009. A big part of the rise to end‐2008 was related to BNA liquidity management. The cost of BNA bills is borne by the treasury. Consequently government debt maturities
1 Typically operational arrears relating to wages, goods and services and transfers (due to fuel and water and electricity utilities and transportation subsidies) are accrued every year and paid off by the end of Q1 of the following year using the previous year’s cash balances after a verification process
10 0 10
20 30 40
GGD/GDP GG Bal
Public Finances (%)
Source: MoF, Fitch forecasts
0 10 20 30 40 50 60
B/C/D'
BB'
BBB'
A'
AA'
AAA'
Angola
General Government Debt: GDP (2009)
Source: Fitch (%)
Sovereigns
Angola May 2010 6
rose to 13.3% in 2008 and 19.7% in 2009, reflecting in large part domestic debt maturities in 2008 and 2009, greatly increasing refinancing risk. Debt maturities are far higher than for the ‘BB’/‘B’ peer group.
BNA bills provide the market‐determined reference rate, whereas government bond yields are not necessarily market determined. The US treasury is providing assistance to Angola to strengthen debt management. As part of this, the government will start issuing regularly, and in kwanza (AOA), to build up a yield curve. This will help the government develop more financing flexibility.
External debt was USD8.6bn or 12.9% of GDP at the end of 2009. It comprised USD5.6bn of bilateral debt, of which USD4.7bn was bilateral oil‐backed credit lines 2 , just USD400m of multilateral debt and USD2.7bn of commercial loans and supplier loans, of which USD1.2bn is oil‐backed commercial loans 3 . According to the BNA, 90% of commercial oil‐backed loans have been phased out. According to Fitch calculations, the average interest rate on overall public debt ranged between 8% and 11.4% in 2005‐2009. Public enterprises other than Sonangol do not borrow externally. The government does not provide guarantees for Sonangol but considers its debt to be an implicit contingent liability. However, given Sonangol’s strong asset position, the risk of any contingent liability materialising is extremely low.
Sonangol Sonangol had assets worth USD21bn in 2008 (25% of Angola’s GDP). In addition to Sonangol E.P., which is the concessionaire, and Sonangol P&P, an oil operator involved in exploration and production, it has six other commercial subsidiaries in the areas of distribution, logistics, aviation, telecoms and shipping as well as several financial investments. Some of these subsidiaries have investments abroad. For example, Sonangol P&P is investing in oil and gas in Mexico, Nigeria, Gabon, Iraq, Iran, Brazil and Cuba. The distribution subsidiary is investing in Sao Tome, Cape Verde and the Republic of Congo.
Sonangol’s quasi‐fiscal operations involve only the distribution and subsidy of fuel products, where it uses its countrywide distribution network. It no longer services the government’s debt.
Angola agreed a settlement of all legacy arrears with the Paris Club in 2006 with no haircut. Only USD400m of penalty interest was cancelled. It paid off USD2.3bn of principal and interest arrears in 2006 and 2007 and USD1.8bn of penalty arrears in three instalments — the last instalment was on 31 January 2010. Angola also settled arrears bilaterally to non‐Paris‐Club members. Around USD300m of arrears remain, mainly to the former Yugoslavia (because of difficulties identifying the beneficiary).
Following a domestic arrears regularisation exercise for confirmed pre‐2003 supplier arrears, USD1.83bn have been paid or securitised and the remaining USD123m are to be securitised.
Monetary and Foreign Exchange Policy The fall in the oil price (H208‐Q109) and “capital flight” increased demand for FX. The BNA responded by tightening liquidity by putting up the banks’ reserve requirement to 30%, letting the exchange rate depreciate by 4% in April, rationing foreign exchange in Q209‐Q309, and spending around USD6bn defending the exchange rate. The parallel rate premium rose from below 3% in April to 27% by end September. In Q409, the BNA normalised the FX market, by freeing up the exchange rate and resuming market‐based auctions. This resulted in a 14% depreciation (19%
2 From China, Brazil and Portugal. These are less onerous than commercial oil‐backed loans. Quantities of oil are not set but a minimum balance for debt service has to be put in an escrow account. The government pays this money directly
3 These are supported with escrow accounts which are funded by the proceeds of the oil sales
‐5 0 5
10 15 20 25 30
Jan
09
Mar
09
May
09
Jun
09
Aug
09
Oct
09
Dec
09
Feb
10
Spread (%)
Parallel Rate Premium
Source: BNA
Sovereigns
Angola May 2010 7
for the whole year). By year‐end, helped by the sustained recovery of oil prices and IMF balance‐of‐payments support worth USD341m in November, confidence had started to return. In Q110, reserves accretion resumed. The exchange rate continued to decline, but in an orderly adjustment, and the parallel market exchange rate appreciated and converged. By end‐March 2010, it was 4.7% above the official rate.
The oil price recovery, continued IMF balance‐of‐payments support and implementation of a conservative 2010 budget (budgeted oil price USD58/b versus Fitch forecast USD80/b) should support a stable currency and further reserves accumulation.
On the monetary policy side, the local interbank market remained very active throughout the crisis. Interbank interest rates shot up to as high as 22% in Q409. In February 2010, they remained elevated at 22.6%. The BNA bill/treasury bill (91‐day) rate shot up to 23.3% in December 2009 (from 14.7% in Q109), well above inflation of 15%. It stood at 25% in mid‐April. This partly reflects the crowing‐out of BNA bills by government treasury bills issuance in 2009 and it should start to fall as confidence takes hold.
The crisis highlighted the need for important structural monetary and exchange rate policy reforms, in particular addressing the persistence of dollarisation in the economy. The BNA plans to tighten rules on banks’ FX exposure to 100% of capital for long‐term loans and 40% of short‐term loans from 20% for both long‐ and short‐term loans in a scheduled 18‐month process starting in June 2010; to include capital to compensate for FX risk in the regulatory solvency ratio; a review of the regulation on banks’ compulsory reserves, which currently include FX deposits and securities; and to encourage the government to issue only AOA‐denominated securities.
Balance of Payments After five years of surpluses averaging 14% of GDP, the current account shifted to a large deficit of 10.5% in 2009, due primarily to the fall in oil prices and production. Angola has a large structural trade surplus, which was above 50% of GDP in 2005‐ 2008, but this fell to 26% in 2009. This is offset by a large services deficit (averaging 22% in 2004‐2009) and income deficit (14% in 2004‐2009), representing services and dividend payments to the oil sector and increasingly technical assistance as Angola hires workers from abroad to bridge its skills gap. Private remittances are not an important source of FX earnings.
The trends on the current account — in particular export revenue — are the main influence driving the overall balance of payments. Fitch expects the current account to improve to a surplus of around 5% of GDP in 2010 due to the rebound of oil prices and an increase in oil production. This should strengthen the overall balance of payments.
Economic Performance and Structural Reforms Non‐Oil Sector Non‐oil real growth averaged 14.6% in 2006‐2009. It has been broad‐based, partly reflecting the recovery of general economic activity after the war, but also very strong investment in infrastructure and its spill‐over effects. In 2006‐2009 — using Chinese, Brazilian, Portuguese and Israeli credit lines, labour and inputs and its own financial resources — the government has spent an average of USD8bn a year on building or rebuilding roads 4 , ports 5 , airports 6 , railways 7 and hydro‐power dams 8 as
4 By 2008, 3,250km out of a total network of 4250km had been completed, providing access to all provinces
5 The Luanda, Namibe and Lobito ports are being refurbished or built 6 Domestic airports are being refurbished 7 Three railway lines are being rebuilt, with the Mocamedes line in the south nearing completion 8 Electricity output rose by 80% from 2004 to 4,050MW in 2008. There is ongoing investment in three hydro‐
power plants, mini hydros and transmission lines
70
80
90
100
Jan
09
Apr
09
Jun
09
Sep
09
Dec
09
Mar
10
Official BDC (AOA/USD)
Exchange Rates
Source: BNA
19 20 21 22 23 24 25 26
Dec 09 Jan 10 Feb 10 Mar 10 Apr 10
28 days 63 days 91 days 182 days 364 days
BNA Bills interest rates Dec 09‐April 10
(%)
Source: BNA
50
30
10
10
30
50
Current transfers Income balance Services balance Trade balance Current Accouont Balance
Current Account
(% GDP)
Source: BNA , IM F IFS, Fitch fo recasts
70 75 80
85
90 95
Jan 04 Jul 05 Jan 07 Aug 08 Feb 10 0 5 10
15
20 25
Official reserves (RHS) Official exchange rate (LHS)
Exchange Rate and
Official Reserves
(AOA /USD)
Source: BNA , IM F IFS
(USDbn)
Sovereigns
Angola May 2010 8
well as social housing, schools, universities and hospitals. In Fitch’s view, this scale of investment is a key positive for the rating by alleviating severe supply‐side bottlenecks in the short run and raising the productive potential of the economy, and bodes well for the continued strengthening of creditworthiness.
Infrastructure needs are still very high. Energy generation and water and sanitation are the next main focus. A budgetary medium‐term expenditure framework will help in terms of prioritising expansion. Access to international capital markets is intended to provide alternative sources of financing.
In addition, structural reforms need to be implemented to improve the weak business environment. Problems include excessive bureaucracy, weak legal structure, corruption and the high cost of living due to limited supply of skills, housing and bottlenecks at the ports as Angola has to import almost all goods and inputs. Much of the bureaucratic constraint is captured in its overall World Bank Ease of Doing Business (WB DBI) rank of 169 out of 183 countries in 2010, while the “trading across borders” ranking of 171 reflects congestion at the ports.
The construction boom should ease some of the housing and transport infrastructure bottlenecks, and bring down the cost of living. ANIP (the investment promotion agency) approved domestic and foreign investments in the non‐oil/non‐ minerals sector worth USD1.8bn in 2009 (or 5% of non‐oil GDP), up from USD1.4bn in 2008. ANIP suggests that the WB DBI does not capture recent changes like the newly created one‐stop centre. But it does concur that investors want speedier processes in attaining visas and less bureaucracy.
Oil Sector Oil sector growth averaged 10.1% in 2006‐2009. Oil production doubled between 2003 and 2008 to around 1.9 million b/d, propelling Angola to the world’s 12th‐ largest producer in that year according to OPEC. Output fell to 1.77 million b/d in 2009 due to OPEC cuts 9 . Current capacity is around 2.1 million b/d. The government plans to keep production at around 2 million b/d over the next four years, although capacity will increase to 2.6 million b/d due to developments from a couple of ultra‐deep water blocks. The country has proven reserves of 13.5 billion barrels expected to last 19.7 years, but it is still relatively unexplored. 10 This natural resource wealth is a fundamental rating strength.
Investment to maintain and increase production was USD49.5bn in 2004‐2008, and rose to about USD20bn in 2009 from USD14.1bn in 2008. The IOCs and Sonangol are investing in two refineries and in a liquefied natural gas (LNG) project. The LNG project, with investment worth USD8bn‐10bn, has a reserve capacity of 5.2 million tonnes/year with a reserve life of over 20 years.
There is respect for contracts, although there can be changes at the margins due to dynamism of the sector 11 . Due to the relatively stable legal and operating environment of its oil sector and low cost of production 12 , most of the world’s oil majors are present in Angola, with Chevron having the longest record of over 50 years.
Political and Social Reforms There has been relative stability since the war ended in April 2002, and a return to civil war is very unlikely. A ceasefire was agreed with some elements of Front for
9 OPEC quota shares are linked to capacity. There was a 20% quota cut for Angola in 2009 10 Angola has exploited only two out of five offshore basins. 99% of current production is from the Congo
basin. Pre‐sample results show good prospects in all other offshore basins. The country also has four onshore and four inshore basins. Between 2004 and 2008, 5.8bn barrels of oil were discovered in Angola
11 Concerns in this regard are new environmental fees that would be higher than international standards and the FX law requiring all money to be put back through the banking system (although more than one law has been proposed but not passed)
12 Average cost per barrel is low at around USD5‐6. Average price per barrel is only a small discount below Brent crude
0 10 20 30
Agriculture
Forestry & fishing
Oil & gas
Diamonds
Manufacturing
Electricity & water
Construction
Wholesale & retail trade
Nontradable services
Average Real GDP Growth 2006‐2009 Subtitle
Source: Angolan authorities (%)
2009 Share of GDP
Source: Angolan authorities
Wholesale & retail trade
22.3%
Oil & gas 42.5% Agriculture,
forestry & fishing 11.2%
Nontradable services
8.2%
Construction 8.1%
Manufacturing 6.8%
Diamonds 0.9%
Electricity & water 0.1%
0 1,000
2,000 3,000
4,000 5,000
Hydro Thermal
Power Output
Source: Ango lan autho rities
GWh
0
500
1,000
1,500
2,000
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Yearly Oil Production
(000 bpd)
Source: Angolan authorities
Sovereigns
Angola May 2010 9
the Liberation of the Cabinda Enclave (FLEC) in the Cabinda region and restiveness there has been contained to a few opportunistic attacks on foreigners. Unlike in Nigeria’s Niger Delta, there are no attacks on oil facilities, as Chevron provides a livelihood for the population as suppliers and through direct employment. The Cabinda rebels/population want a greater share of the oil wealth and of power, and this issue has to be addressed over time, to prevent the situation escalating.
President Eduardo Dos Santos has been in power since 1979. A post‐war reformist government included elements of the opposition UNITA (Union for the Total Independence of Angola) party in the Government of National Unity and Reconciliation (GURN). First legislative elections were held in September 2008 in which MPLA (Popular Movement for the Liberation of Angola) won 81.7% of the vote. Support for the MPLA government reflected recognition of progress on addressing infrastructure and ongoing support for ending the war. The opposition is fragmented and has no alternative policy proposals.
A new constitution was passed in February that concentrates much power in the presidency. It is a parliamentary system, which means that President Dos Santos will not have to stand for re‐election until 2012. The system limits political space but it does provide stability and a strong presidency, which can allow big strides to be made in infrastructure and development. Future support for the MPLA will depend on how the government tackles the very high levels of poverty.
Angola: September 2008 National Assembly Election Results Party Votes (%) Seats Popular Movement for the Liberation of Angola (MPLA) 81.64 191 (+62) a
National Union for the Total Independence of Angola (UNITA) 10.39 16 (‐54) Social Renewal Party 3.17 8 (+2) New Democracy Electoral Union 1.20 2 (+2) National Front for the Liberation of Angola 1.11 3 (‐2) Others (9) 2.49 0 (‐7) Total 100.00 220 a Footnote: Swing compared with 1992 National Assembly Elections. Source: Electoral Commission of Angola
Angola’s UN Human Development Index (HDI) ranking is better than those of other countries in the region, but this is mainly pulled up by its much higher GDP per capita. Angola also has the advantage of much larger financial resources to address the gaps in education, health and housing. In recent years, social spending has taken up around 30% of the budget and this level of spending will continue over the medium term. The government has built the social infrastructure 13 and is in the short run hiring foreigners to work as health workers and train teachers. The government is also building social housing and industrial parks to provide employment in those areas.
13 The government has built new primary, secondary and vocational schools and universities (in all eight provinces) and is training teachers using Portuguese and Israeli credit lines and personnel, of whom 30,000 were incorporated into the 2010 payroll. Similarly, it has built new referral hospitals for every capital city of every province and health centres across the country using credit lines from Spain, Portugal and China, and is hiring health workers from countries such as Russia, Vietnam, Philippines, Cuba, Brazil and Portugal to run them. 9,000 new health workers were incorporated into the 2010 payroll
Sovereigns
Angola May 2010 10
Forecast Summary 2006 2007 2008 2009 2010f 2011f
Macroeconomic indicators and policy Real GDP growth (%) 18.6 23.3 13.8 2.7 8.3 8.0 Consumer prices (annual average % change) 13.3 12.2 12.5 13.8 13.0 10.0 Short‐term interest rate (%) a 6.3 15.0 14.6 23.3 18.0 15.0 General government balance (% of GDP) 11.8 11.3 8.9 ‐9.1 6.0 3.7 General government debt (% of GDP) 14.3 17.9 25.5 32.7 25.1 20.3 AOA per USD (annual average) 80.4 76.7 75.0 79.3 90.0 85.0 Real effective exchange rate (2000 = 100) 191.0 207.2 223.7 249.0 246.5 249.0 External finance Current account balance (USDbn) 10.7 10.2 6.4 ‐7.5 3.9 6.2 Current account balance (% of GDP) 25.6 16.9 7.6 ‐10.5 4.8 6.1 Current account balance plus net FDI (% of GDP) 25.0 13.9 6.6 ‐11.6 3.9 5.3 Net external debt (USDbn) ‐7.1 ‐9.2 ‐15.7 ‐9.1 ‐13.7 ‐18.7 Net external debt (% of GDP) ‐16.9 ‐15.2 ‐18.7 ‐12.7 ‐16.8 ‐18.5 Net external debt (% of CXR) ‐21.1 ‐20.3 ‐24.2 ‐21.8 ‐25.2 ‐30.4 Official international reserves including gold (USDbn) 8.6 11.2 17.9 13.6 18.4 25.6 Official international reserves (months of CXP cover) 4.5 3.8 3.7 3.3 4.4 5.6 External interest service (% of CXR) 2.4 1.3 2.0 2.5 1.7 0.8 Gross external financing requirement (% int. reserves) ‐203.6 ‐69.5 ‐35.2 67.3 ‐8.5 ‐13.1 Memo: Global forecast summary Real GDP growth (%) US 2.7 2.1 0.4 ‐2.4 3.0 2.9 Japan 2.0 2.4 ‐1.2 ‐5.2 1.8 1.6 Euro area 3.0 2.7 0.6 ‐4.7 ‐0.2 2.0 World 3.9 3.6 1.7 ‐3.3 1.4 2.5 Commodities Oil (USD/barrel) 65.4 72.7 97.7 64.0 80.0 85.0 a BNA 91‐day bills rate (end year) Source: Fitch
Sovereigns
Angola May 2010 11
Strengths • Angola has a very strong growth record since the war ended in 2002, due to
rising oil production, reconstruction and the normalisation of economic activity. The five‐year average of 15.8% is far higher than for rating peers. Nominal GDP in USD terms rose by 3.6x between 2004 and 2009 to USD71.8bn (USD84.1bn in 2008), propelling Angola to the third‐largest economy in sub‐Saharan Africa (SSA) following South Africa (‘BBB+’; USD286bn) and Nigeria (‘BB−’; USD168m).
Weaknesses • Growth is more volatile than ‘BB’/‘B’ medians due to the volatility of oil prices
and output, which accounted for 43% of GDP in 2009. Oil output will stabilise over the medium term, but a counter‐cyclical fiscal policy buttressed by accumulated foreign assets could help mitigate the impact of volatile prices on public spending and therefore on non‐oil sector growth.
• As a result of improved macroeconomic policies, inflation fell from over 100% before 2004 to an average of 13% in 2006‐2009. The high volatility on a 10‐year basis partly reflects the wartime legacy. The relatively high ongoing inflation reflects supply‐side bottlenecks and the challenge to liquidity management of high oil revenue and spending. The BNA expects average inflation to fall only slightly to 13% in 2010 from 13.8% in 2009 due to increased government spending and the impact of last year’s exchange rate depreciation.
• There is strong dollarisation in terms of deposits, contracts and payments due to a history of high inflation and a constantly depreciating currency until 2004. In the recent currency crisis, the dollarisation ratio (foreign deposits/overall deposits) rose to 50.8% in December 2009 from 42.1% a year earlier, putting additional pressure on the exchange rate.
Commentary Despite a commendable growth record and impressive disinflation, macro stabilisation is not yet fully entrenched, as evidenced by last year’s crisis. Infrastructure bottlenecks partly explain continuing high inflation, but despite substantial fiscal deposits, the government’s room for counter‐cyclical fiscal policy was surprisingly limited and domestic contractor arrears increased sharply. Reforms envisaged under the IMF programme will help strengthen budgetary and financial planning and put the economy in a stronger position to weather future oil price volatility.
Comparative Analysis: Macroeconomic Performance and Policies
Angola 2009
Angola ‘B+’
Venezuela ‘B+’
Gabon ‘BB‐’
Nigeria ‘BB‐’
Ghana ‘B+’
‘BB’ median
‘B’ median
Real GDP (5‐yr average % change) 15.8 6.1 2.1 6.5 6.1 4.2 5.9 Volatility of GDP (10‐yr rolling SD) 7.9 8.7 2.2 4.7 1.1 3.1 2.6 Consumer prices (5‐yr average) 15.0 21.7 2.4 11.1 14.3 7.7 9.4 Volatility of CPI (10‐yr rolling SD) 99.5 7.1 2.1 4.5 7.5 3.4 4.3 Years since double‐digit inflation 0.0 0.0 15.0 0.0 0.0 n.a. n.a. Unemployment rate ‐ 7.5 ‐ ‐ ‐ 8.8 9.5 Type of exchange rate regime Managed float Managed Float Pegged Managed float Managed float n.a. n.a. Dollarisation ratio 50.8 ‐ 12.3 ‐ 42.2 46.7 REER volatility (10‐yr rolling SD) ‐ 15.8 3.5 6.7 12.2 8.3 7.8
Source: Fitch
0 5
10 15 20 25
2003
2004
2005
2006
2007
2008
2009
2010
Angola ‘BB’ median ‘B’ median
Real GDP Growth
(%)
Source: Fitch
0 10 20 30 40 50 60 70
Jan 04 Jul 05 Jan 07 Aug 08 Feb 10
BNA B ills rate (91 days) Inflation (yoy)
Monthly Inflation and BNA
Bills rate
(%)
Source: BNA
40
50
60
70
Jan 04 Jul 05 Jan 07 Aug 08 Feb 10
Foreign deposits/Total deposits
Monthly Dollarisation Ratio
(%)
Source: BNA
Sovereigns
Angola May 2010 12
Strengths • Angola is rich in natural resources. It is SSA’s largest oil producer and the
world’s fourth‐largest producer of diamonds. Its oil‐sector is well managed, and this has enabled a doubling of oil production between 2003 and 2008. Its oil production per capita is 104.2 barrels per 1,000 people, on a par with Azerbaijan (‘BB+’) but much higher than Nigeria (‘BB−’).
• GDP per capita in USD has risen 6x since the end of the war in 2002 to USD3,865 in 2009, slightly below the ‘BB’ median and well above the ‘B’ median.
Weaknesses • Angola’s WB DBI ranking and governance indicators are below the ‘B’ and ‘BB’
medians. But strong progress on reforms and addressing infrastructure suggests that government effectiveness is improving. On Transparency International’s Corruption Perception 2009 Index, Angola ranks 162 of 180 countries.
• Angola’s HDI index percentile is well below the ‘B’ and ‘BB’ medians but ranks 10th in SSA, pulled up by higher GDP per capita. Its weak health and education indicators are affected by the legacy of the civil war, when there was a lack of investment in human capital. Per capita spending on health and education is now higher than in most countries in SSA. The country has free healthcare. Adult literacy rates are lower than in most Fitch‐rated countries in SSA, but enrolment rates are higher.
• The banking system is well capitalised, has relatively low non‐performing loans (2.5% at end‐2009) and loans/deposit ratio (56.5%). However, the high levels of foreign‐currency deposits and foreign‐currency loans (65.3% of credit at the end of 2009) increase the risks to the banking sector. Financial intermediation is relatively low, with a private credit/GDP ratio at 22%. Recent credit growth represents lending to the government. The sector is underdeveloped. This and the fact that it is mostly privately owned — only three banks accounting for 19.3% of assets are publicly owned — reduces contingent liabilities to the government.
Commentary WB governance and business climate indices may understate improvements given the weak starting point and rapid pace of reform.
Comparative Analysis: Structural Features
Angola 2009
Angola ‘B+’
Venezuela ‘B+’
Gabon ‘BB‐’
Nigeria ‘BB‐’
Ghana ‘B+’
‘BB’ median
‘B’ median
GNI per capita PPP (USD, latest) 5,020 12,830 12,270 1,940 1,430 8,140 3,810 GDP per capita (USD, mkt exchange rates) 3,865 12,762 7,472 1,016 673 4,588 2,015 Human Development Index (percentile, latest) 21.5 68.6 43.6 13.2 16.5 53.6 38.2 Ease of Doing Business (percentile, latest) 7.7 3.3 13.8 31.9 50.0 52.0 39.6 Trade openness (CXR and CXP % GDP) 63.2 16.5 51.5 40.4 66.2 n.a. n.a. Gross domestic savings (% GDP) n.a. 26.7 58.6 9.9 9.0 16.9 12.6 Gross national savings (% GNP) n.a. 25.6 39.0 16.0 18.2 19.8 18.8 Gross domestic investment (% GDP) 33.5 23.6 22.1 11.9 25.2 20.6 23.6 Private credit (% GDP) 22.2 20.9 10.7 40.0 29.0 34.6 29.5 BSR Indicators n.a. n.a. D3 n.a. n.a. n.a. Bank system CAR 16.0 13.8 ‐ 22.5 ‐ n.a. n.a. Foreign bank ownership (% assets) 46.8 16.6 ‐ 11.8 ‐ n.a. n.a. Public bank ownership (% assets) 19.3 25.3 ‐ 0.0 ‐ 18.1 20.2 Default record (year cured) 2006 a 1999 2005 2005 2005 n.a. n.a. a Paris Club agreement to settle arrears in instalments starting 2006. Process completed January 2010. Source: Fitch and World Bank
0 50
100 150 200 250 300 350
Nig
eria
‘B
B‐’
Col
ombi
a ‘B
B’
Mex
ico
‘BBB
’ Ve
nezu
ela
‘B
+’
Ango
la
Gab
on
‘BB‐
’ Li
bya
‘BBB
+’
Oil Production per Capita (barrels/1,000 people)
Source: Fitch
0
2,000
4,000
6,000
2002
2003
2004
2005
2006
2007
2008
2009
2010
f
Angola ‘BB’ median ‘B’ median
GDP Per Capita
(USD)
Source: Fitch
'B ' Rating Median Angola
Governance Indicators 2008
Source: World Bank, Fitch
Polit ical stability
Gov't effectiveness
Rule of law
Contro l o f corruption
Voice and accountability
Regulatory quality
Sovereigns
Angola May 2010 13
Strengths • Angola became a net external creditor in 2006 after paying off most Paris Club
arrears and a strong build‐up of reserves as a result of rising oil output and prices. It gained a positive net foreign asset (NFA) position in 2007, reflecting a rising portfolio (USD6.5bn by 2008) and direct investment (USD3.5bn) and FX deposits by the banks and private sector (USD15.8bn) abroad. At the end of 2008, government and private‐sector assets totalled USD43bn.
• Fitch estimates that Angola’s NFA position was around 12.7% of GDP in 2009, down from 18.7% of GDP in 2008 due to the USD6bn fall in reserves. This is still much stronger than ‘BB’/‘B’ rating medians, but in line with oil producers, which tend to have strong NFA positions. By comparison, Nigeria’s NFA position in 2008 was 8.7%, Gabon’s 5.1% and Azerbaijan’s 28.1%.
• External debt service fell from a peak of 26% in 2004 to 13% in 2009, reflecting the phasing‐out of commercial oil‐backed loans, which were relatively costly and short‐term. It also reflects rising exports revenue. Fitch estimates that it will be between 7%‐9% in 2010‐2011. External debt service has been below the 10‐year ‘BB’/‘B’ medians since 2007. Similarly, the liquidity ratio has been above 100% since 2007.
Weaknesses • With oil and gas accounting for 97.5% of exports revenue and diamonds 2% in
2009, the balance of payments is highly vulnerable to commodity price shocks. Consequently following five years of current account surpluses, the current account shifted to large deficit in 2009 due to the fall in commodities prices. This put substantial pressure on the overall balance of payments and caused reserves to fall as the authorities intervened to support the exchange rate.
Commentary Between 2006 and 2009, a portion of reserves was invested in equity securities, debt securities and other investment assets, specifically hedge funds, real estate funds and private equity funds. As such, usable reserves were lower than gross reserves by USD1.2bn (2006) to USD2.55bn (2009). This, however, does not make a material difference to the key liquidity and solvency ratios which still compare well with the ‘BB’/‘B’ medians.
Comparative Analysis: External Finances
Angola 2009 Last 10 years
Angola ‘B+’
Venezuela ‘B+’
Gabon ‘BB‐’
Nigeria ‘BB‐’
Ghana ‘B+’
‘BB’ median
‘B’ median
GXD (% CXR) 51.6 112.7 44.6 32.7 81.7 107.6 100.7 GXD (% GDP) 30.0 19.9 25.7 13.6 51.1 41.4 51.3 NXD (% CXR) ‐21.8 ‐210.9 5.2 ‐44.9 44.0 15.8 29.8 NXD (% GDP) ‐12.7 ‐37.2 3.0 ‐18.7 27.5 7.0 15.9 GSXD (% GXD) 59.1 48.0 73.0 41.5 72.8 49.2 64.2 NSXD (% CXR) 2.8 ‐1.6 0.1 ‐48.8 28.9 9.5 25.0 NSXD (% GDP) 1.6 ‐0.3 0.0 ‐20.3 18.1 2.9 13.6 SNFA (USDbn) ‐1.1 10.3 0.0 34.2 ‐3.0 ‐0.4 ‐1.1 SNFA (% GDP) ‐1.6 2.8 0.0 20.3 ‐18.1 ‐2.7 ‐13.2 Ext. debt service ratio (% CXR) 13.4 13.2 ‐2.0 3.2 8.9 16.6 10.6 Ext. interest service ratio (% CXR) 2.5 5.2 2.8 1.2 3.4 5.0 3.0 Liquidity ratio (latest) 292.0 262.7 538.2 718.3 97.8 135.2 146.8 Current account balance (% GDP) ‐10.5 2.4 12.2 2.6 ‐7.4 ‐2.0 ‐4.0 CAB plus net FDI (% GDP) ‐11.6 1.0 16.2 5.9 ‐2.5 1.5 ‐0.4 Commodity dependence (% CXR, latest) 98.0 82.2 89.1 82.1 34.6 32.8 37.4 Sovereign net FX debt (% GDP) ‐3.1 2.0 0.0 ‐19.1 18.1 ‐ ‐
Source: Fitch
‐10
0
10
20
30
40
50
Nig
eria
‘B
B‐’
Col
ombi
a ‘B
B’
Indo
nesi
a (B
B+)
Vene
zuel
a ‘B
+’
Ango
la
Azer
baij
an
(BB+
) G
abon
‘B
B‐’
Egyp
t (B
B+)
SNFA of Sub‐Investment Grade oil producers 2009
Source: Fitch
(% of GDP)
‐50
‐40
‐30
‐20
‐10
0
10
Nig
eria
‘B
B‐’
Cam
eroo
n 'B
' In
don
esia
'B
B+'
Vene
zuel
a ‘B
+’
Ango
la
(B+)
Az
erba
ijan
'B
B+'
Gab
on
‘BB‐
’ Eg
ypt
'BB'
NXD/GDP 2009 (%) Sub‐ Investment Grade Oil
Source: Fitch
Sovereigns
Angola May 2010 14
Strengths • Fiscal surpluses were strong in 2005‐2008, despite a rapid increase in capital
spending from 4% of GDP in 2004 to an average of 13% of GDP in 2006‐2008; current expenditure rose in real terms but fell from 31% of GDP in 2004 to 25.4% in 2006‐2008 on average. Government deposits rose to 17.4% of GDP in 2008 but fell to 9.9% in 2009 following the oil price shock and a deficit.
• Public debt ratios (relative to revenue and GDP) are moderate and below the ‘BB’/‘B’ medians. But they are higher than those for Nigeria and Gabon (two other Fitch‐rated SSA oil‐producing countries). In 2009 the net government debt: GDP ratio was around the same level as Gabon’s.
Weaknesses • Dependence on oil revenue makes the budget vulnerable to oil price volatility.
The government has used a conservative oil price and targeted a current budget surplus, but fiscal policy has nevertheless proved pro‐cyclical. The 2009 oil price shock highlights the need for further reforms to strengthen fiscal management and oil price buffers. The IMF programme aims to reduce the non‐ oil primary deficit/non‐oil GDP ratio to 25% in the medium term. Tax policy and administration reforms for the non‐oil sector are to be introduced; non‐oil revenue is only about 8% of GDP. The government plans to make big expenditure cuts by improving the procurement process and removing subsidies.
• General government debt maturities are large and volatile. They were extremely large in 2008 (13.3% of GDP) and 2009 (19.7%), reflecting increased resort to short‐term debt — BNA bills and treasury bills — as the central bank mopped up excess liquidity in 2008 and then a large deficit had to be financed in 2009, with long‐term domestic finance very constrained. Debt maturities are forecast to fall to 6%‐7% in 2010‐2011, still higher than ‘BB’/‘B’ medians.
Commentary Angola defaulted on its pre‐1986 external debt during the civil war and was cut off from unsecured private borrowing. However, since the war ended, the government and Sonangol have been able to access international debt markets through oil‐ backed commercial loans and then bilateral loans. The government’s debt service record on these loans is good, though the government has still not been able to borrow on unsecured terms. It reached an agreement on its Paris Club debt in 2006 and arrears were fully cleared in January 2010. There was no haircut. The government has a clean domestic debt service record.
Comparative Analysis: Public Finances
Angola 2009 Last 10 years
Angola ‘B+’
Venezuela ‘B+’
Gabon ‘BB‐’
Nigeria ‘BB‐’
Ghana ‘B+’
‘BB’ median
‘B’ median
Budget balance (% GDP) ‐9.1 ‐5.7 6.5 ‐2.0 ‐9.7 ‐2.2 ‐2.0 Primary balance (% GDP) ‐6.8 ‐4.3 8.1 ‐2.6 ‐5.7 0.8 0.7 Revenue and grants (% GDP) 32.4 16.8 32.4 19.5 29.2 24.2 30.5 Volatility of revenue/GDP ratio ‐ 22.0 4.1 19.1 12.1 6.2 10.5 Interest payments (% revenue) 7.0 8.2 4.9 6.0 13.6 11.3 7.3 Debt (% revenue) 100.8 104.2 80.7 77.3 199.5 183.1 173.1 Debt (% GDP) 32.7 17.5 26.1 15.1 58.2 40.1 42.4 Net debt (% GDP) 22.8 13.0 20.5 ‐5.2 52.4 34.4 36.2 FC debt (% total debt) 89.3 66.2 71.7 45.9 63.9 62.0 74.8 CG debt maturities (% GDP) 19.7 1.4 3.2 4.0 11.4 5.3 4.7 Average duration of CG debt (years) 5.8 6.7 ‐ ‐ 3.4 8.0
General government if not otherwise specified Source: Fitch
0
5
10
15
2004
2005
2006
2007
2008
2009
2010
f
2011
f
Capital spending % of GDP
Capital Expenditure (%)
Source: MoF
‐25 ‐15 ‐5 5
15 25
Azer
baij
an
'BB+
' N
iger
ia
‘BB‐
’ C
amer
oon
'B'
Vene
zue
la
‘B+’
Ango
la
(B+)
Gab
on
‘BB‐
’
Net GGD/GDP 2009
Source: Fitch
(%)
Sovereigns
Angola May 2010 15
Fiscal Accounts Summary % of GDP 2006 2007 2008 2009 2010f 2011f General government Revenue 50.2 45.8 50.9 32.4 39.7 38.2 Expenditure 38.4 34.5 42.0 41.5 33.8 34.4
O/w interest payments 1.6 1.1 1.5 2.3 1.0 1.4
Primary balance 13.4 12.4 10.4 ‐6.8 7.0 5.2 Overall balance 11.8 11.3 8.9 ‐9.1 6.0 3.7
General government debt 14.3 17.9 25.5 32.7 25.1 20.3 % of general government revenue 28.6 39.0 50.0 100.8 63.3 53.2
General government deposits 17.3 13.8 17.4 9.9 12.0 12.2 Net general government debt ‐3.0 4.1 8.1 22.8 13.2 8.1
Central government Revenue 50.2 45.8 50.9 32.4 39.7 38.2 O/w grants 0.0 0.0 0.0 0.0 0.0 0.1
Expenditure and net lending 38.4 34.5 42.0 41.5 33.8 34.4 O/w current expenditure and transfers 25.4 23.0 27.9 28.4 23.6 22.4
‐ interest 1.6 1.1 1.5 2.3 1.0 1.4 O/w capital expenditure 13.0 11.5 14.1 13.1 10.2 12.1
Current balance 24.8 22.8 23.1 4.0 16.1 15.8 Primary balance 13.4 12.4 10.4 ‐6.8 7.0 5.2 Overall balance (accruals basis) 11.8 11.3 8.9 ‐9.1 6.0 3.7 Change in arrears (increase positive) ‐7.9 2.9 5.5 4.7 ‐1.4 ‐0.6 Overall balance (cash basis) 3.9 14.2 14.4 ‐4.4 4.5 3.2
Central government debt 14.3 17.9 25.5 32.7 25.1 20.3 % of central government revenues 28.6 39.0 50.0 100.8 63.3 53.2
Central government debt (AOAbn) 481.6 825.3 1,608.6 1,764.4 1,432.5 1,161.7 By residency of holder
Domestic 120.4 397.6 1,044.8 1124.9 793.3 671.2 Foreign 361.2 427.6 563.8 737.5 1052.5 1073.8
By place of issue Domestic 120.4 397.6 1,044.8 1124.9 793.3 671.2 Foreign 361.2 427.6 563.8 737.5 1052.5 1073.8
By currency denomination Local currency 120.4 397.6 1,044.8 189.5 180.2 180.2 Foreign currency 361.2 427.6 563.8 1672.9 1665.6 1564.8
in USD equivalent (eop exchange rate) 4.5 5.7 7.5 17.6 14.7 11.5 By maturity
Less than 12 months (residual maturity) 173.3 300.5 842.8 1124.7 598.1 611.4 Average maturity (years) ‐ ‐ ‐ 3.5 ‐ ‐ Average duration (years) ‐ ‐ ‐ ‐ ‐ ‐
Memo Non‐financial public‐sector balance (% GDP) ‐ ‐ ‐ ‐ ‐ ‐ Net non‐financial public‐sector debt (% GDP)
Nominal GDP (AOAbn) 3,358.5 4,636.8 6,316.2 5,695.0 7,340.6 8,589.0
Source: Ministry of Finance and Fitch estimates and forecasts
Sovereigns
Angola May 2010 16
External Debt and Assets (USDbn) 2003 2004 2005 2006 2007 2008 2009 Gross external debt 8.5 9.1 10.4 8.2 10.7 18.1 21.5 % of GDP 61.7 45.9 33.8 19.6 17.8 21.4 30.0 % of CXR 86.1 65.3 42.3 24.4 23.7 27.8 51.6
By maturity Medium‐ and long‐term 8.5 9.1 10.3 8.1 10.1 15.4 18.2 Short‐term 0.0 0.0 0.1 0.1 0.6 2.6 3.3 % of total debt 0.2 0.2 0.6 1.2 5.8 14.4 15.2
By debtor Monetary authorities 0.0 0.0 0.0 0.0 0.0 0.4 0.6 Public sector (incl. Sonangol) 8.3 9.0 10.2 7.4 9.6 13.5 12.7 O/w central government 7.0 7.5 6.1 4.1 5.3 7.9 9.4 Banks 0.1 0.1 0.1 0.3 0.9 3.9 4.9 Other sectors (excl. public sector
corporations) 0.1 0.0 0.0 0.5 0.2 0.6 3.9
Gross external assets (non‐equity) 3.3 5.8 8.1 15.2 19.9 33.8 30.6 International reserves, incl. gold 0.6 1.4 3.2 8.6 11.2 17.9 13.6 Other sovereign assets nes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Deposit money banks' foreign assets 1.3 1.4 1.8 3.1 3.1 6.0 4.6 Other sector foreign assets (including
Sonangol) 1.5 3.1 3.2 3.5 5.7 10.2 10.7
Net external debt 5.2 3.3 2.3 ‐7.1 ‐9.2 ‐15.7 ‐9.1 % of GDP 37.9 16.8 7.4 ‐16.9 ‐15.2 ‐18.7 ‐12.7 % of CXR 52.9 23.9 9.3 ‐21.1 ‐20.3 ‐24.2 ‐21.8
Net sovereign external debt 7.7 7.6 7.0 ‐1.2 ‐1.6 ‐4.4 1.1 % of GDP 55.7 38.4 22.9 ‐2.8 ‐2.7 ‐5.2 1.6
Net bank external debt ‐1.1 ‐1.2 ‐1.5 ‐2.8 ‐2.1 ‐1.7 ‐3.4 Net other external debt 0.0 ‐1.6 0.9 0.3 ‐1.2 ‐4.0 ‐3.5
Net international investment position ‐17.2 ‐16.7 ‐13.1 ‐2.1 3.9 12.9 ‐ % of GDP ‐124.1 ‐84.2 ‐42.7 ‐4.9 6.4 15.3 ‐
Sovereign net foreign assets ‐7.7 ‐7.6 ‐7.0 1.2 1.6 4.4 ‐1.1 % of GDP ‐55.7 ‐38.4 ‐22.9 2.8 2.7 5.2 ‐1.6
Debt service (principal & interest) 2.0 3.9 3.7 5.7 5.5 4.3 5.4 Debt service (% of CXR) 20.7 25.6 12.5 15.2 10.6 5.8 13.4 Interest (% of CXR) 3.5 2.8 2.3 2.4 1.3 2.0 2.5
Liquidity ratio (%) 89.4 53.4 89.1 96.0 239.6 327.1 292.0 Net sovereign FX debt (% of GDP) ‐ ‐ ‐ ‐ ‐ ‐ ‐ Memo Nominal GDP 13.8 19.8 30.6 41.8 60.4 84.2 71.8 Gross sovereign external debt Inter‐company loans ‐ ‐ ‐ ‐ ‐ ‐ ‐
Sources: NBP, IMF, World Bank and Fitch estimates and forecasts
Sovereigns
Angola May 2010 17
Debt Service Schedule on Medium‐ and Long‐Term Debt at end 2009 (USDbn) 2009 2010 2011 2012 2013 2014 2015+ Sovereign (including Sonangol) 2,767.0 1,962.6 1,923.7 2,028.5 1,718.3 1,394.8
Interest 900.0 846.8 369.9 297.6 215.6 154.4 Total sovereign debt service 3,367.0 2,809.4 2,293.6 2,326.1 1,933.9 1,549.2
Private sector (estimated) Amortisation 1758.9 768.4 1870.6 1870.6 1870.6 1870.6 Interest 140.7 61.5 149.6 149.6 168.3 177.7
Total private debt service 1,899.6 829.9 2,020.2 2,020.2 2,038.9 2,048.3
Memo Non‐sovereign public sector (Sonangol) 1613.0 1010.2 960.7 941.5 904.9 665.5
Sources: Ministry of Finance, Central Bank and Fitch estimates
Sovereigns
Angola May 2010 18
Balance of Payments (USDbn) 2006 2007 2008 2009 2010f 2011f
Current account balance 10.7 10.2 6.4 ‐7.5 3.9 6.2 % of GDP 25.6 16.9 7.6 ‐10.5 4.8 6.1 % of CXR 31.9 22.5 9.9 ‐18.0 7.2 10.1
Trade balance 23.1 30.7 42.9 18.3 29.1 34.2 Exports, fob 31.9 44.4 63.9 40.7 53.4 60.5 Imports, fob 8.8 13.7 21.0 22.4 24.3 26.2
Services, net ‐6.0 ‐12.7 ‐21.8 ‐17.9 ‐16.6 ‐17.4 Services, credit 1.5 0.3 0.3 0.3 0.3 0.4 Services, debit 7.5 13.0 22.1 18.2 16.9 17.8
Income, net ‐6.2 ‐7.6 ‐14.5 ‐7.7 ‐8.4 ‐10.4 Income, credit 0.1 0.6 0.4 0.4 0.5 0.5 Income, debit 6.3 8.2 14.9 8.2 8.9 10.9
O/w: Interest payments 0.9 0.6 1.3 0.9 0.8 0.4
Current transfers, net ‐0.2 ‐0.2 ‐0.2 ‐0.2 ‐0.2 ‐0.2
Memo Non‐debt‐creating inflows (net) ‐4.9 ‐8.7 ‐8.2 ‐0.5 ‐0.6 ‐0.2 O/w equity FDI ‐3.4 ‐6.8 ‐6.5 1.0 1.0 1.5 O/w portfolio equity ‐1.5 ‐2.0 ‐1.8 ‐1.5 ‐1.6 ‐1.7 O/w other 0.0 6.0 1.1 1.1 1.0 0.0
Change in reserves (‐=increase) ‐5.4 ‐3.0 ‐6.7 6.3 ‐4.8 ‐7.2 Gross external financing requirement ‐5.9 ‐5.3 ‐3.3 12.0 ‐0.1 ‐1.8 Stock of international reserves, incl. gold 8.6 11.2 17.9 13.6 18.4 25.6
Sources: IMF and Fitch estimates and forecasts
Sovereigns
Angola May 2010 19
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