IMF representative says public debt remains sustainable

Marcos Souto participated in the virtual seminar "Uncomplicating the OGE [General Budget of the State]", organized by the Ministry of Finance, in partnership with the United Nations Children's Fund (Unicef) in Angola.

According to Marcos Souto, it is also important to maintain the application of growth-promoting reforms.

The official stressed that public debt "still remains subject to high risks, largely associated with the very strong dependence that the Angolan economy has on oil activity."

"This public debt has an important metric, which is the amount of debt divided by growth, by GDP [Gross Domestic Product], so it is necessary to act on the two important metrics, which is both the numerator of public debt and the denominator of GDP. Hence the need for measures that promote sustainable and inclusive growth," he said.

For Marcos Souto, from the debt point of view, the budgetary effort that the Government has been making over the last few years is very important, demonstrating that it intends to maintain fiscal prudence in the coming years.

"This would guarantee a reasonably fast decline trajectory for public debt in the coming years and here we also have the measures that will support inclusive sustainable economic growth and thereby improve the denominator of public debt. Based on this exercise, we believe that the debt is - and we hope to remain - sustainable in the medium, long term", he stressed.

Regarding the country's public debt, the Minister of Finance, Vera Daves de Sousa, said at the opening of the seminar that the depreciation of the kwanza and the contraction of GDP increased the public debt/GDP ratio, due to indexed and dominated debt in dollars. .

"The kwanza when depreciating causes this dollar-dominated debt indexed to the dollar to increase and the contraction of GDP that is in the denominator of this ratio, as it is smaller, also causes the ratio to increase, so that we had challenges in both domains, both in the numerator and in the denominator of the ratio", he referred.

Vera Daves de Sousa pointed out as the main vectors of the 2019-2021 debt management strategy the reduction of the weight of domestic instruments indexed to foreign currency.

"We simply stopped issuing indexed debt and also contracting external debt collateralized with any type of raw material, we sought to lengthen the debt maturity curve, reducing the number of treasury bill issuances and increasing treasury obligations and with longer terms," ​​he explained.

The government official said that the implementation of the program for the settlement of arrears on debt accumulated between 2013 and 2017 continues.

"We have to be more and more rigorous and sharp with this impetus to create debt not registered in the SIGFE [Integrated State Financial Management System], we must not continue to be condescending to this practice that damages public finances in a very strong way, we must yes, to avoid as much as possible the accumulation of arrears, debt registered in the SIGFE and we must increasingly sharply discourage the formation of arrears outside the SIGFE", he advocated.

Last July, consultant Fich Solutions estimated that Angola's budget balance this year will shift from deficit to surplus, mainly due to oil revenues, seeing public debt below 100 percent of GDP in 2022.