Lack of detail in Angola’s debt deals with China could hide future risk
Lack of detail in Angola’s debt deals with China could hide future risk
, has reportedly secured a better debt relief deal with Exim Bank of China, but could be on the hook down the track over less favourable agreements with two other Chinese banks.
Angolan finance minister Vera Daves de Sousa revealed the three-year debt relief package last week at a Reuters Next event. “We’ve got three years of breathing space and we will take best advantage of that,” she said.
in its fourth review of the Expanded Financing Programme (EFF) for Angola. The IMF has disbursed US$2.9 billion since the start of the programme in 2018, with total financing expected to reach US$4.4 billion.
However, the IMF’s latest disbursement will have been conditional on a sustainable trajectory for Angola’s public debt, which in turn hinges on Chinese debt relief, according to Nick Branson, director at Africa-focused consultancy Gondwana Risk Limited.
He said Angolan authorities had routinely skirted around key details, raising doubts over loan rescheduling terms, in particular with China Development Bank (CDB) and the Industrial and Commercial Bank of China (ICBC).
Angola is China’s largest borrower in Africa with more than US$20 billion in outstanding debt from some Chinese entities, including US$14.5 billion to the CDB and $5 billion to the Export-Import Bank of China. It has also borrowed from ICBC, China’s largest lender.
Branson said the IMF’s third review last year noted progress in negotiations with two Chinese lenders and that Angola had formally requested the rescheduling of debt service payments from a third creditor – most likely China Exim Bank – under the G20’s Debt Service Suspension Initiative (DSSI).
However, the World Bank subsequently indicated in its Global Economic Prospects report that “two of Angola’s largest creditors – most likely China Development Bank and Industrial and Commercial Bank of China – rejected the DSSI term sheet but agreed to defer principal payments for three years”, he said.
“The World Bank’s language would suggest that Angola is still on the hook for interest payments to CDB and ICBC, and that debt rescheduling is therefore not NPV-neutral. This would drive up the total cost of CDB and ICBC loans over the long-term.”
Branson said it was likely that Angola had struck a net present value-neutral deal with China Exim Bank under the DSSI term sheet, and two less favourable agreements with CDB and ICBC.
“This would reduce fiscal pressures in the short-term but merely increase risk of sovereign default when Angola’s first Eurobond matures in November 2025,” he said.
in September had played a significant role in the IMF’s release of US$1 billion to Angola last year.
“Having received considerable relief from China, this almost certainly remained an important factor in the latest IMF assessment, especially with regards to debt sustainability,” Forizs said.
Angola is heavily dependent on China for loans and its oil export market. Of the US$148 billion advanced by China to African countries between 2000 and 2018, US$43.2 billion – about 29 per cent – went to Angola, according to the China Africa Research Initiative at the Johns Hopkins University’s School of Advanced International Studies.
