"Provided that oil prices remain stable and the government continues with prudent budgetary spending, we anticipate that Angola may see further rating increases in the next 12 to 18 months given our forecasts of an increase in oil production and an increase in the economic growth in this period", reads a comment by analysts.
The analysis, sent to investors and to which Lusa had access, comes a few days after Fitch Ratings raised its assessment of Angola's credit quality by two levels, from CCC to B-.
"A risk related to our forecast of better budgetary metrics in the short term is if the growing discontent with the current government and the conclusion of the program with the International Monetary Fund lead to excessive public spending on the eve of this year's elections", warn the analysts at Oxford Economics Africa.
Oil revenues have risen significantly since the beginning of 2021, "dramatically improving Angola's budgetary position", recall the analysts, stressing that despite the fall in production, the rise in prices led to revenue rising by more than 60 percent in the last year, moving the budget balance from a deficit of 1.7 percent in 2020 to a surplus of 2.9 percent last year.
"In addition to the recovery in oil revenues, the three largest rating agencies were also impressed by the strong fiscal consolidation efforts and currency liberalization under the program with the IMF, which ended last year", conclude the analysts.
The financial rating agency Fitch Ratings on Friday improved Angola's rating to B-, with a perspective of stable evolution, anticipating an economic expansion of 2.1 percent for this year, after growing 0.1 percent in 2021.
"There was a substantial improvement in external and fiscal metrics, supported by a return to positive economic growth, good fiscal management and higher oil prices", write analysts at this financial rating agency owned by the same owners of the consultancy Fitch Solutions.
"Oil prices have recovered significantly since the beginning of the covid-19 pandemic and the probability of negative scenarios related to oil markets has dropped compared to September 2020, when we lowered the rating to CCC, or compared to September 2021, when we maintained the CCC rating", argues Fitch Ratings.
According to the calculations of these analysts, the ratio of public debt to Gross Domestic Product (GDP) should have fallen to 78.5 percent at the end of 2021, which represents, they admit, "a significant improvement compared to the forecast of 126 .9 percent made in September 2020 and well below the 123.8 percent of GDP in 2020".
The debt-to-GDP ratio, one of the indicators most followed by international investors to gauge the country's ability to honor financial commitments, is expected to decline even further, to 74.8 percent of GDP in 2022 and 73 percent of GDP in 2022. next year, "as a result of the nominal increase in GDP (which rose 32.4% in 2021, partially reflecting oil prices), a stabilization of the kwanza, with the previous depreciation being an important reason for the increase in debt in the years previous years, due to foreign currency debt worth 70 percent of the total, and a continued commitment to fiscal consolidation.
Despite the strong reduction in the debt ratio, Angola remains above the countries that Fitch classifies as being on the B scale of investment, which have an average of 68 percent of GDP, the analysts also warn in the note, which concludes that the expenditure will remain relatively stable in relation to GDP, although the Government will "avoid further fiscal consolidation on the eve of the 2022 elections".
The rating of B-, which represents an increase of two levels compared to the CCC previously assigned by Fitch Ratings, means that analysts consider that despite the credit being highly speculative, the country has the capacity to meet its financial commitments, and is five investment grade levels (from BBB-).
