Lower oil prices reduce Angola’s creditworthiness

This situation could make it difficult to service debt in the “next 12-18 months,” which is why it gives it a ‘CCC +’ rating, the rating agency said in a statement.

Then S&P said that the development prospects are “stable”.

To justify the assigned “rating”, the agency argued that “despite high oil prices this year, high external debt payments raise concerns about the sustainability of Angola’s debt in the medium term.”

However, the rating agency said that “bilateral debt restructuring agreements with creditors have created some breathing room by 2023.”

In its text, the S&P said that its “rating” is still “constrained by the high weight of the government’s external debt service” throughout the forecast scenario, which extends to 2024.

However, the agency noted that Angola’s bilateral agreements with China and other G-20 members have provided some relief until 2022. The revised agreements include deferral of debt and related interest payments.

S&P estimates that these agreements cut payments that Angola is expected to make by the end of 2022 by $ 2.8 billion to $ 7.2 billion.

The ratings agency noted that another immediate relief for Luanda’s leaders comes from the recent rise in oil prices, given the dependence of Angola’s economy on the resource.

Oil, according to S&P quantification, accounts for 20% of Angola’s gross domestic product, 90% of its exports and 50% of tax revenues.

S&P Global Ratings predicts that the average price per barrel of oil will be $ 65 this year, $ 60 in 2022 and $ 55 in 2023, which is comparable to $ 42 in 2020 anyway.

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