Angolan slides deeper into debt

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By Samuel Pascoal

In addition to the various loans accumulated since the beginning 2014 economic crises in attempts to desperately hold the country’s economy afloat, the Angolan government has now applied for US$2 billion loan from the African Export Import Bank.

Afreximbank president, Benedict Oramah, has confirmed that it is preparing a financing line of up to US$2 billion to guarantee imports of food and medicines into Angola.

The bank stated that the loan is aimed at allowing Angolan imports, namely through international credit lines.

Oramah, who met Angolan Head of State João Lourenço in Luanda on May 24, said the money will help Angola to import “essential products”, including food and medicines.

He added that negotiations with the Angolan government include a proposal for an additional US$1 billion credit facility through Afreximbank’s Investment Guarantee Refinancing Facility to be channelled to the private industrial sector, including export, manufacturing, fishing, agri-business and tourism to boost exports.

Oramah said the financing would also support the financial service sector by enabling selected Angolan banks to issue letters of credit, to be confirmed by Afreximbank, for the continued importation of essential commodities.

The Afreximbank executive also held meetings with Archer Mangueira, Minister of Finance of Angola and Dr José de Lima Massano, the Governor of the Banco Nacional de Angola, to agree on modalities for the implementation of the proposed financing as well as on Angola’s participation in the Intra-African Trade Fair being organised by Afreximbank in Cairo from December 11 to 17.

Due to the prolonged drop in the international price of oil, from the end of 2014, Angolan oil export revenues have fallen to around half, forcing public indebtedness in order to ensure the continuity of several public works.

The government has told investors in an official report dubbed ‘Palanca 2’, that presently public debt surpasses 70% of the GDP and is expected to increase to US$77.3 billion, equivalent to 70.8% of GDP, by the end of 2018. Public debt in 2017 stood at 67% of GDP. 

This excludes debts of state oil company Sonangol that also runs in billions of dollars.

The government noted in the report that “high levels of indebtedness or failure in the proper management of its debts could have an adverse effect on the economy and its ability to pay back the said debts”.

The report added that in the most recent government estimate, the Angolan state raised approximately US$3.4 billion in debt in the first quarter of this year, of which US$1.3 billion was collected in the domestic market and approximately US$2.1billion  were raised externally. The same report admits, however, that Angola could further increase the debt to finance projects that were not included in the General State Budget of 2018. The most recent forecast indicates that the debt service represents approximately US$23.4 billion this year.

In a country blatantly mired in corruption and mismanagement of public funds, it is evident to all onlookers that Angola is treading on thin ice, that being, if the status quo cannot already be seen as a debacle, then one is to say, Angola is in deep economic troubles!

 

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