Angola: Fitch Affirms Angola’s ‘B-’ Credit Rating with Stable Outlook

Fitch Ratings has reaffirmed Angola’s long-term foreign-currency Issuer Default Rating (IDR) at ‘B-’ with a stable outlook, reflecting the country’s economic challenges and fiscal strengths. Key factors influencing the rating include Angola’s significant reliance on foreign-currency-denominated debt, elevated inflation, and weak governance indicators.

The report highlights Angola’s heavy dependence on commodities, one of the highest among Fitch-rated sovereigns. However, this vulnerability is counterbalanced by substantial international reserves, current account surpluses, and manageable debt repayment risks supported by favorable oil prices.

Current Account and Reserves Outlook

Fitch projects Angola’s current account surplus to rise to 6.0% of GDP in 2024 (up from 3.8% in 2023), driven by stable Brent crude prices averaging USD 80 per barrel, increased oil production, and reduced imports due to foreign exchange (FX) scarcity and a weakened kwanza. In 2025, the surplus is expected to narrow to 1.3%, reflecting lower oil export revenues as Brent prices decline to USD 70 per barrel.

Despite these challenges, Fitch notes that Angola will maintain a strong foreign exchange buffer. International reserves are forecasted to remain stable at USD 15.2 billion in 2024, covering 5.7 months of current external payments (CXP)—significantly higher than the 3.7 months expected for the ‘B’ median. Reserves are projected to decrease slightly to USD 14.5 billion by 2026, yet remain robust at 5.5 months of CXP coverage.

Debt Repayment and Fiscal Performance

Angola has demonstrated a strong commitment to debt servicing. The government repaid USD 1.7 billion in net external debt principal during the first nine months of 2024, following USD 1.6 billion in repayments in 2023. Fitch forecasts the government debt-to-GDP ratio will decline from 73.7% in 2023 to 63.9% in 2024 and further to 58.6% in 2026, supported by nominal GDP growth, primary fiscal surpluses, and debt restructuring efforts.

Fitch anticipates external debt repayments to remain high at USD 5.4 billion in 2024, rising to USD 6.2 billion in 2025, before easing slightly in 2026. These obligations are expected to be financed through oil revenues, bilateral and multilateral disbursements, and escrow accounts tied to oil-backed loans.

The government’s fiscal deficit is forecasted to remain steady at 2.3% of GDP in 2024, before widening to 3.3% in 2025as oil revenues decline. Despite reduced fuel subsidies, increased spending on goods, services, and public sector salaries will limit expenditure adjustments. Total government revenue is projected to decline from 15.4% of GDP in 2023 to 13.3% by 2026.

Economic Growth and Inflation

Angola’s economy is forecasted to grow by 3.2% in 2024, up from 1.0% in 2023, primarily due to a recovery in crude oil production, which is expected to average 1.13 million barrels per day (mbpd) in 2024, compared to 1.1 mbpd in 2023. However, growth is projected to slow to 2.2% in 2025 and 2.4% in 2026, reflecting declining oil production, persistent inflation, and FX constraints.

Inflation is expected to remain elevated, averaging 28.0% in 2024, driven by the depreciation of the kwanza and higher fuel prices following subsidy reductions.

Structural Challenges and Outlook

Fitch highlights persistent FX liquidity constraints as a major challenge for Angola’s economy, limiting growth in the non-oil sector. Although increased FX sales in the domestic market have reduced demand backlogs in banks, overall liquidity conditions remain tight.

Fitch expects Angola’s external financing environment to improve over the medium term, supported by easing monetary policies in the US and Eurozone. However, high government interest payments, projected at 28% of revenue in 2024—compared to the ‘B’ median of 13.9%—will continue to strain fiscal resources.

Despite structural weaknesses, Angola’s strategic management of debt and commitment to fiscal reforms provide a foundation for resilience. Fitch’s stable outlook reflects a balance between the country’s vulnerabilities and its demonstrated ability to manage external risks effectively.