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Fitch Ratings has reaffirmed Angola’s long-term foreign-currency issuer default rating at ‘B-’ with a stable outlook, citing a delicate balance between persistent structural vulnerabilities and ongoing fiscal reforms.
The rating reflects key risk factors such as weak governance, elevated inflation, and a high dependence on foreign-currency debt and oil exports—placing Angola among the most commodity-reliant countries rated by Fitch.
However, these challenges are offset by relatively robust international reserves and consistent current account surpluses, which provide Angola with a degree of protection against external shocks and limited financing avenues.
Fitch projects Angola’s current account surplus to decline to 1.3% of GDP in 2025 and 2026, down from 5.5% in 2024. This anticipated drop is attributed to expected lower oil exports, with Brent crude assumed at $65 per barrel in 2025–2026, compared to $79.5 in 2024. A minor decline in oil output—from 1.1 million barrels per day (mbpd) in 2024 to 1.07 mbpd—is also forecast.
Despite this, Angola’s foreign exchange reserves are expected to remain a critical buffer. Reserves are projected to decrease from $15.8 billion at end-2024 to $14.0 billion by 2026, largely due to elevated external debt service obligations. The country’s external liquidity ratio will hover near 110%, slightly below the ‘B’ category median of 130%, while reserve coverage of imports remains above the peer average at around six months.
Debt Metrics Improve Amid Audits and Reforms
Government debt-to-GDP dropped to 54.6% at end-2024 from 70.7% the previous year, bolstered by strong nominal GDP growth, fiscal surpluses, and net external repayments of $1.9 billion. A comprehensive audit of public debt also uncovered duplications, reducing the reported debt stock by $1.8 billion.
Fitch anticipates this positive trend will continue, projecting debt-to-GDP to fall further to 48.1% by 2026. This will be supported by sustained primary budget surpluses and economic growth, although currency depreciation remains a risk.
Angola’s fiscal deficit narrowed to 1.0% of GDP in 2024 (on a commitment basis) from 1.9% in 2023, helped by reduced government spending. While the government’s fuel subsidy burden was equivalent to 2.7% of GDP in 2024, these costs did not generate actual cash outflows, as state oil company Sonangol absorbs the expense and settles it via tax reconciliation—resulting in an estimated cash surplus of 1.7% of GDP.
Fitch forecasts fiscal deficits of 2.4% and 2.3% for 2025 and 2026 respectively, driven by expected declines in oil revenues. Cash deficits for the same period are projected at 0.6% and 0.9%, as fuel subsidy reforms reduce subsidy costs to 1.8% and 1.4% of GDP.
However, political and social expenditures tied to Angola’s 50th independence anniversary in 2025 and the upcoming 2027 general elections may constrain further fiscal tightening.
Financing Outlook and Growth Trajectory
Angola’s external amortisation burden will remain high—estimated at $6.5 billion in 2025 and $5.2 billion in 2026—while interest payments are expected to consume close to 30% of government revenue, more than double the ‘B’ median of 13%.
Overall gross financing needs are expected to decline due to reduced domestic amortisations, dropping to around 2% of GDP in 2025 from 5% in 2024. In the absence of international bond market access, the government plans to tap alternative funding sources, including multilateral institutions like the World Bank and AfDB, export-credit agency lines, and domestic bond markets—especially USD-denominated instruments.
Angola’s 2025 budget also includes a provision for borrowing up to $2 billion from the central bank with a five-year repayment term.
Growth and Inflation Outlook
Economic growth is expected to moderate after a strong performance in 2024. Real GDP grew by 4.4% this year, spurred by improved oil output and gains in the services and diamond sectors. Fitch forecasts growth to slow to 2.8% in 2025 and 3.0% in 2026, constrained by lower oil revenue and tight monetary conditions.
Inflation is projected to average 20% in 2025 and 16% in 2026—still markedly above the ‘B’ median of 4%. The National Bank of Angola’s tightening stance, including a cumulative 250 basis points rate hike since October 2023 (bringing the key policy rate to 19.5%), is expected to support disinflation alongside favorable base effects.
Fitch warns, however, that inflationary risks remain. These include a premature easing of monetary policy, continued fuel subsidy adjustments, further depreciation of the kwanza, and the government’s import-substitution strategy, which could push up staple food prices.
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