Speaking to the Lusa agency, António Estote commented on the downward revision of the rating of Angola's long-term sovereign debt, from B3 to Caa1, by the financial rating agency Moody’s that changed the outlook to stable.
“This notation was expected by the economic class and should also bring some attention here to the level of budgetary units, at the level of the Ministry of Finance, in such a way that we should stop doing the fiscal pedaling, getting into debt to finance investment projects. , whose operability is questioned ”, he considered.
According to the economist, Angola should stop investing when it cannot functionally maintain the investments previously made.
"I believe that this credit rating will negatively and significantly affect economic activity in Angola, above all, in terms of costs and indebtedness on the part of the Government of Angola", he stressed.
António Estote stressed that, with this downward revision, Angola became a country that was previously characterized as a country of low speculation and a low rating, passing on a high risk of 'default' (default) and low interest, especially in level of foreign direct investment.
According to the economist, the country is currently in a vicious cycle of public debt, that is, it is contracting new credits "under more severe conditions, to pay credits previously contracted".
“This contraction will make investors cover Angola more, given the need for investment. On the other hand, since Angola is currently negotiating the rescheduling of the debt with China and, at the same time, requesting disbursement by the IMF (International Monetary Fund), this rating will bring an additional alert to these institutions and the country, naturally, so that they take some care in granting additional credit to Angola ”, he said.
For the economist, this notation "is not new" because Angola has reached since 2016, when it deliberately eliminated the public debt limit of up to 60 percent of the Gross Domestic Product (GDP), an exacerbated debt to finance mainly bankrupt companies.
From that time on, he continued, “there was a fiscal cycle, that is, the indebtedness was exacerbated, especially to finance public companies in a state of bankruptcy”, which will happen again in the near future with the Bank of Savings and Credit (BPC).
“This level of indebtedness means that foreign investors are careful to invest in Angola, almost nobody else invests, besides the big oil companies, which have very well safeguarded their interests in Angola and are able to recover the investment made in the country”, referred.
On the other hand, António Estote underlined that this new classification will not have a retroactive impact on the credits previously requested, but on the credits to be requested, granted or negotiated.
"In such a way that when the State places public debt securities on the market, it will have an even higher interest rate to cover the investment risk and interest of foreign investment", he stressed.
Moody’s justified the decision to revise Angola’s rating downwards with “the shocks resulting from the sharp drop in oil prices and the new coronavirus pandemic and the related worsening of the currency devaluation”.
These factors "contributed to a significant weakening of the country's already weak public finances and fragile external position", he specified.
Moving from the perspective to stable means for Moody’s that the credit risks to Angola are “adequately reflected in the current rating of Caa1”.
The B3 and Caa1 notes both belong to a non-investment grade, whose descending scale ranges from Ba1 to C.
Bonds classified as Caa (1,2 or 3) are considered to be of poor quality and subject to a very high credit risk in the definition of the rating agency.
