Angolan Eurobonds tumbled after the leader of Africa’s largest oil producer said the country is struggling to meet debt payments because of the crash in crude prices.
Revenue is “barely enough” to pay debt owed by the government and Sonangol, the state oil company, President Jose Eduardo dos Santos said at a meeting of the ruling MPLA party, according to a broadcast on state TV Friday. The central bank has been receiving about $300 million a month from oil companies, “manifestly insufficient for the needs of banks and the needs of the state budget,” Dos Santos said, Bloomberg reported.
The decline in the price of the debt drove up the yields on Angola’s $1.5 billion of eurobonds due in November 2025 by 68 basis points to 10.41% in the capital, Luanda, the most since Jan. 20 on a closing basis and set for the highest since April 12. Blackrock Inc. is the biggest holder of the bonds, according to data compiled by Bloomberg.
Angola, sub-Saharan Africa’s biggest economy after Nigeria and South Africa, has been battered as oil prices fell by more than half since 2014 to about $50 a barrel. The commodity accounts for 70% of revenue and almost all exports. The government hasn’t received oil proceeds from Sonangol since the beginning of the year, Dos Santos, 73, said.
The comments came a day after the central bank raised its benchmark interest rate 200 basis points to a record 16%, and the International Monetary Fund said Angola had called off talks about a bailout loan to help steady the economy. The government only wants to continue discussions about getting technical help, IMF spokesman Gerry Rice said at a briefing in Washington.
Tumbling Currency
The kwanza has fallen 20% against the US currency in 2016. Even so, its official value of 169.22 per dollar is much stronger than the black market rate of about 620, which has weakened as hard currency becomes scarcer. The central bank may devalue the kwanza by as much as 20%, the Novo Jornal reported, citing banking officials it didn’t identify.
The nation’s ratio of debt to gross domestic product will rise to 70% this year, more than double the 2013 figure of 33%, the IMF said in April.
It is “very important that any further debt that Angola takes on is done at the lowest possible cost and plowed back into projects that will help the economy diversify away from oil and earn revenues,” Candy Mazzuchetti, a country-risk analyst at FirstRand Ltd.’s Johannesburg-based investment banking unit, said in an e-mailed response to questions.
