Angola Considers IMF Financing Amid Rising Bond Yields and Oil Price Declines

Angola is negotiating with the IMF regarding financing options as soaring bond yields and declining oil prices restrict access to international markets. Finance Minister Vera Daves de Sousa emphasized an exploratory approach to discussions, stating that the government will consider proposals before making any formal requests. With rising loan payments and a reliance on oil revenue, Angola must navigate fiscal challenges while also considering loans from the World Bank and Africa’s Development Bank.

Angola is in talks with the International Monetary Fund (IMF) regarding potential financing packages, as reported by its finance minister, Vera Daves de Sousa. This comes amid rising bond yields due to a slump in oil prices and trade wars that have effectively shut the country out of international bond markets. De Sousa characterized the discussions as exploratory, aiming to assess financial options rather than making any formal requests at this time.

In an interview during the IMF-World Bank Spring Meetings in Washington, De Sousa noted that once the IMF presents proposals, she will confer with the Angolan government and President Joao Lourenco before deciding whether to pursue a formal request. Meanwhile, Angola’s dollar bonds saw a slight uptick in performance; yields on the 2048 dollar bonds fell to approximately 13.05%. These bonds performed relatively well compared to others in the emerging markets category.

The Angolan government is facing a significant challenge with rising loan payments, needing to allocate much of its fiscal revenue for salaries and debt servicing. A bond worth $864 million is set to mature this November, pressuring finances even further. Angola has a history with the IMF, having engaged in two programs since emerging from a civil war in 2002, the most recent being a $3.7 billion extended fund facility initiated in 2018.

As the second-largest oil producer in Africa, following Nigeria and Libya, Angola is also exploring loans from other international bodies like the World Bank and the African Development Bank. Daves de Sousa emphasized their commitment to minimizing expenditures to lessen financing needs while continuing to examine various funding avenues.

The Finance Minister stated it is “most likely” that Angola will refrain from entering international debt markets until bond yields dip back to single digits. Just two months prior, the country had intended to issue around $1.5 billion in bonds throughout 2025. However, average yields on Angola’s dollar bonds have surged to 13.5%, marking one of the highest rates among governments. The spread relative to US Treasuries approaches the troubling 1,000 basis-point mark, indicating distress in investor sentiment.

Despite experiencing economic growth last year, Angola’s economy, valued at $115 billion, remains heavily reliant on oil exports, contributing nearly all export income and approximately 60% of government revenue. With Brent crude prices dropping around 10% this year to under $67 a barrel, commodity investors predict that US tariffs across numerous countries will dampen global economic activity.

To manage the impacts of falling oil prices, Angola has undertaken a “stress analysis” regarding fiscal balance ramifications. De Sousa indicated that maintaining oil prices at around $55 would allow the government to navigate without further aid, assuming adjustments to expenditures are implemented. The current budget hinges on an anticipated oil price of $70, highlighting the precarious balancing act in the nation’s financial planning.

In a bid to bolster revenues, authorities plan to finalize the sale of stakes in key enterprises, including the telecommunications giant Unitel SA, Banco de Fomento Angola SA, and Standard Bank de Angola SA. This move is part of broader efforts to stabilize and invigorate the financially strained economy.

In summary, Angola’s discussions with the IMF for potential financial assistance illustrate the pressures faced by the nation amid soaring bond yields and plummeting oil prices. The government is looking at various avenues to secure funding while managing debts and fiscal demands. With a reliance on oil revenue and ongoing economic challenges, Angola is exploring partnerships with international financial institutions and planning asset sales to stabilize its financial situation. The outcome of these efforts may significantly impact the country’s economic trajectory in the coming years.

Original Source: financialpost.com