Fitch Ratings has lowered its risk rating on Angola to “B-“, reflecting the impact of lower oil production and prices and the consequent devaluation of the national currency, the kwanza, according to a statement issued recently.
Those three factors, the statement said, have resulted in increased levels of public debt and the costs of debt servicing and, at the same time, the fall in foreign reserves.
“The risks associated with this scenario are even higher, given the expected rapid decline in public spending,” Fitch said despite keeping the outlook for Angola unchanged at “stable.”
Fitch expects the downward pressure on the kwanza to continue, after a fall of 36% in 2019, albeit at a slower rate, given the rapid decline in the value of the currency against the major currencies – the dollar and the euro – since the exchange rate has been set on the basis of supply and demand rather than being set administratively.
It also said that foreign reserves had reached a 10-year low of US$15.4 billion in September 2019, prior to the issue of eurobonds in November 2019 which helped to increase its value.