S&P: Reforms were key to improving Angola's rating

"The reform aspect was fundamental for the improvement of the rating", said Zahabia Gupta in an interview with the Lusa agency, the week after S&P had improved its opinion on the quality of sovereign credit, from CCC+ to B-.

"The government was very committed to the reform program, they had a program with the International Monetary Fund (IMF), and we saw the government implement very difficult reforms; the immediate impact was very hard for them, because inflation rose to double digits in several years, and poverty is very high in the country, the population felt some pain, but on the budget side they were very committed to cutting spending and increasing the tax base, and they are seeing the results of that", said the analyst.

Asked about Luanda's ability to maintain the pace of reforms in an election year, Zahabia Gupta admitted that election years are always more difficult, both in terms of reformist measures and in terms of maintaining the balance in public accounts, but stressed that these ' hazards' are already incorporated in the forecasts.

"There are several risks with reforms; one is that the IMF program is over, and it served as a political anchor, we will have to see the commitment to reforms without the IMF this year; the second risk is that there are elections, and that creates pressure for a In addition, we see a united front in the opposition, with sporadic protests because of the economy, there is a possibility that the government will spend more to appease the population, but this is built into our forecasts, that is, we anticipate some slippage, but we hope, in general , that the reforms continue to diversify the sources of income and the economy", replied the analyst.

On the possibility of Angola negotiating another financial adjustment program with the IMF, after the US$4.5 billion received in the last three years, Zahabia Gupta says that is not likely.

"The government has not asked for another program, in terms of financing needs, the authorities consider that they do not need more funds, they have sufficient budgetary cushions in foreign reserves and oil prices are at 90 dollars per barrel, despite our estimate being $75 a barrel for the year as a whole, but at this level they think they don't need more funding," the analyst said.

Still, she conceded that "the government may choose to adopt an unfunded IMF program that serves as a political anchor and boosts investor confidence."

Angola plans to return to international debt markets this quarter, issuing an indicative amount of US$2.8 billion, according to the debt plan published this month.