"During the rating review, we will assess the quality of the police response to the shock and the authorities' ability to manage increased difficulties in the government's public finances and current account, against a backdrop of significant oil-related revenue losses and a potential further devaluation of the kwanza," said analyst Aurelien Mali.
In an interview with Lusa about putting Angola's rating under review for a likely downgrade, when asked why it did not follow the other two major financial rating agencies, which have downgraded in recent weeks, the analyst explained that he wants to assess the government's response first.
"This review period, which may extend beyond the normal three-month period, will allow Moody's to assess the credibility and sustainability of the government's plans and its ability to mitigate the impacts of lower prices in the context of sovereign credit quality analysis," he explained.
This week Moody's placed Angola with the prospect of a negative rating evolution, a step that generally precedes the agency's downgrade of credit quality assessment, that is, the debt issuer's ability to meet financial commitments.
"Being under a program of the International Monetary Fund, Angola has made great efforts in fiscal consolidation and reforms in the last 18 months," acknowledges Aurelien Mali, adding that the next few weeks will serve for the rating agency to "assess the severity of any increase in external vulnerabilities, given the sharp drop in oil export revenues and the consequent pressure on foreign currency reserves, as well as the increased risks associated with large volumes of external and internal debt payments.
In the note accompanying the release of the beginning of the rating downgrade, Moody's wrote that the decision was "triggered by the magnitude of the shock due to the sharp fall in oil prices and a strong tightening in global financing conditions, affecting the already weak public finances and external position, and by high financing needs".
In the note, analysts argued that "weak governance capacity, despite several reforms implemented in recent years, undermines the government's ability to respond to this shock and is a guiding thread of this rating action".
With this action, Moody's has not yet lowered Angola's rating, warning the market that conditions have changed and that in the coming weeks it will assess the course of events and then decide whether or not to lower the rating.