"Our calculations show that revenues could be 35 percent below the target for this year if the average price of crude is 25 dollars, and not the 55 dollars per barrel forecast in the budget, which represents a drop in revenues of 5.6 billion dollars, or 7.4 percent of GDP predicted for this year," reads the note analyzing the impact of the drop in oil prices on Angola's finances.
In the analysis, sent to customers and to which Lusa had access, Eaglestone's chief economist writes that "the latest data shows that the oil sector represented more than 96 percent of the country's exports, two-thirds of which went to China, and 60 percent of public revenues last year," which means that "if it continues, this much lower price level could have strong repercussions on public revenues and the Angolan economy.
For Tiago Dionísio, "the current climate with lower oil prices should lead the government to present an amending budget for 2020, where it will possibly include a strong reduction (and/or re-prioritisation) of public expenditure," and may also "accelerate efforts to obtain more non-oil sector revenues, announce new financing from multilateral institutions and/or issue debt on international markets.
According to the document, the most likely scenario is a mixture of these measures "taking into account that an aggressive cut in expenditure would harm economic activity, which is already very fragile, while recourse to debt issuance would put more pressure on the already high level of public debt, around 100 per cent of GDP".
The increase in interest rates demanded by investors, which have risen significantly in recent weeks, should make the government "wait until conditions in the financial markets", but this "puts more pressure on oil dependent countries like Angola".
Thus, he concludes, "the Angolan authorities' next steps will be crucial, particularly in terms of giving a strong signal to the market of their commitment to consolidate public finances, even in the current most difficult context, but Angola will also need help from institutions such as the IMF, since the risk of facing problems in debt repayment is now greater than it was previously".
The consultant's forecasts assume a 30 percent devaluation of the kwanza from 2019 levels, to 540 kwanzas per dollar, and a tax rate of 35.6 percent.
"If the average price of crude reaches 25 dollars this year, then total revenues would be 35.3 per cent below the current estimate included in the budget; this also means that the budget deficit would reach 6.0 per cent of GDP this year instead of the current projection of a surplus of 1.2 per cent of GDP," concludes the chief economist of this consultancy.
The new coronavirus, responsible for the covid-19 pandemic, has already infected more than 324,000 people worldwide, of whom more than 14,300 have died.
After the outbreak broke out in China in December, it spread around the world, leading the World Health Organization (WHO) to declare a pandemic situation.
The continent of Europe is currently the country with the highest number of cases, with Italy being the country with the highest number of deaths, with 5,476 deaths in 59,138 cases. According to the Italian authorities, 7 024 of those infected have already been cured.
China, apart from the territories of Hong Kong and Macao, where the epidemic broke out at the end of December, has a total of 81,054 cases, with 3,261 deaths recorded.
According to the Worldometer portal, which compiles almost in real time the information from the World Health Organization (WHO), the Centers for Disease Control and Prevention from official sources of the countries, scientific publications and media, there are records of deaths by Covid-19 in 13 African countries: Egypt, Algeria, Morocco, Tunisia, Burkina Faso, Gabon, Sudan, Mauritius, Ghana and the Democratic Republic of Congo (DRCongo), in addition to Nigeria, Gambia and Zimbabwe, which announced this Monday the first deaths.
Several countries adopted exceptional measures, including the quarantine regime and the closure of borders.