"Angola's rating reflects the risk to the government regarding medium-term debt sustainability and uncertainty about the sources of external financing available in 2022 and 2023, after the International Monetary Fund programme ends and the external debt service increases significantly in 2023," the note published Thursday reads.
In explaining the maintenance of the opinion on the quality of Angola's sovereign credit, the analysts write, nevertheless, that "the recent recovery in the global price of oil will sustain an improvement in the fiscal position, which, together with the prospects of an increase in GDP growth and a smaller depreciation of the exchange rate, will contribute "to putting public debt on a downward path.
Public debt to GDP has already reached the maximum forecast, reaching a ratio of 124 percent by the end of 2020, and is expected to fall below 100 percent by the end of this year, "partly due to the increase in the denominator, driven by higher oil prices, but still well above the average of 68 percent of B-level countries," says Fitch Ratings.
The government has managed to make a "significant fiscal consolidation effort in recent years in a context of reduced production and oil prices," they add, noting that despite the adjustment, the economy remains "highly dependent on oil revenues, whose prices will reverse the gains of 2021, and in a context of maintaining production" of oil.
Fitch Ratings forecasts that oil production, essential to revive the economy, will fall to 1.18 million barrels per day this year from 1.27 last year, keeping non-oil GDP growth negative.
"We forecast production to rise to 1.2 million barrels per day in 2022 and remain at that level in 2023, but this depends on the start of new production; if this does not happen production could fall by 10 to 15 percent per year," they warn.
