World Markets

Angola closing in on China debt relief deals -senior government official

Angola is close to striking debt agreements with a number of Chinese banks and government agencies, a senior government official said on Friday, though she warned that public debt ratios were likely to rise further by year-end.

By Karin Strohecker

LONDON, Sept 18 (Reuters) - Angola is close to striking debt agreements with a number of Chinese banks and government agencies, a senior government official said on Friday, though she warned that public debt ratios were likely to rise further by year-end.

Angola owes more than $20 billion to a number of Chinese entities, including $14.5 billion to the China Development Bank, and nearly $5 billion to the Export-Import Bank of China. It has also borrowed from China's largest lender ICBC, according to analyst calculations.

Africa's second largest oil exporter is struggling with a rising debt burden following a sharp decline in crude prices and amid the economic fallout from the coronavirus pandemic.

"We are having these negotiations on a very good basis, they have been very open to us, and very open minded about what they can offer us," Angola's secretary of state for budget and investment Aia-Eza Silva told Reuters.

"Some deals are very close to the end ... we are now talking about the paperwork."

Silva declined to elaborate on which negotiations were closest to the finishing line but said a number of solutions for debt relief were under discussion, including a three-year moratorium on payments.

DEBT DEALS

Angola has seen its debt-to-GDP ratio balloon to about 110% at present and Silva said it would rise further, to 123%, by year-end. More than 90% of the debt is denominated in hard currency, mostly U.S. dollars, according to calculations by ratings agency Moody's.

The government aims to reduce its overall public debt burden from $70 billion to $66 billion by year-end, she added, with a focus on its local debt markets.

"The main bucket of our debt service that we have now is internal," Silva said.

Angola has been tackling its suffocating debt pile on many fronts while trying to keep on track ambitious reforms from selling state assets to overhauling its currency.

Paris Club creditors said in late August they had agreed to give Angola debt service relief until the end of 2020.

A steep decline in oil prices in 2014 pushed Angola into an economic crisis and prompted Luanda to agree a $3.7 billion, three-year programme under the International Monetary Fund's Extended Fund Facility which was approved in December 2018.

The IMF's decision on Wednesday to approve immediate disbursement of $1 billion to Angola under the existing programme and increase total funding access by $765 million would help Angola push through with reforms, said Silva.

"Having this approval for this review is definitely good news for us," she said. "We did not anticipate the COVID crisis, we did not anticipate the decrease in the oil price ... but we will hit our targets, we will be doing adjustments."

(Reporting by Karin Strohecker; Editing by Sujata Rao and Catherine Evans)

((karin.strohecker@thomsonreuters.com; +442075427262; Reuters Messaging: karin.strohecker.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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