(Bloomberg) -- Angola’s government is holding talks with the International Monetary Fund about a possible new program and is evaluating what type of loan would better fit the oil-producing country’s needs, Finance Minister Vera Daves de Sousa said.
“We are discussing, we even have a note with the options,” Sousa said in an interview on the sidelines of the International Monetary Fund and World Bank annual meetings in Washington. “After evaluating technically, the discussion will be political,” she said, adding that differences remain with the IMF on capital expenditures.
“It’s the hot topic between the country and the IMF,” she said.
The move takes place after Angola last year resumed debt payments to China, its biggest creditor, following a three-year moratorium. Sousa said on Aug. 16 that most of the country’s revenue is now used to service debt, and little is left to meet other obligations. Angola owes Chinese creditors about $17 billion.
The IMF “recently” sent a note to Angola’s government with the different types of formal programs the country could potentially request from the Washington-based lender, including the so-called extended fund facility or stand-by agreements, the minister said. However, it’s still too early to talk about the size of the loan, Sousa said.
Yields on Angola’s 2028 dollar bonds dropped 20 basis points to 10.33% as of 1:59 p.m. in London on Thursday, declining for the first time in three days.
While the government remains committed to phasing out fuel subsidies, it needs to find a balance between inflation concerns and the social impact that it could generate, said Sousa.
“We are evaluating this together with the central bank and the relevant ministers and will decide on the moment and the size of the movement,” she said.
The African nation has had two programs with the IMF since it emerged from a 27-year civil war in 2002. The latest loan was a $3.7 billion extended fund facility agreed in 2018.
Eurobond Issuance
Sousa said that it will be “very difficult” to tap international markets this year because double-digit yields are too high for Angola, even as the US Federal Reserve is starting to cut interest rates. International capital markets cut the nation out in 2022 as borrowing costs increased.
When markets reopen for Angola, the government plans to issue between $500 million and $1.5 billion in eurobonds, Sousa said, adding that issuing under a private placement is one of the options.
“We will put the energy and attention in 2025 to find the right price to move,” she said.
Sousa also ruled out any plans to restructure debt with Angola’s creditors, saying her government will focus on liability-management operations while it remains away from international debt markets.
Angola’s economy will expand 3.3% this year and 4% in 2025, said Sousa.
“We need to grow more, because our population is growing around 3% each year,” she said.
Her government also aims to raise $160 million this year from the sale of 12 state-owned companies and assets, said Sousa. Luanda-based telecommunications company Unitel “will be the largest” privatization of 2025 and the sale will be carried out through an initial public offering, she said.
Unitel is among the largest of almost 200 state-owned firms the government initially earmarked for disposal in 2019. Some of the sales were delayed because of the coronavirus pandemic.
--With assistance from Robert Brand.
(Updates with yields on Angola’s dollar bonds in sixth paragraph)
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