The strategy seeks a balance between internal and external financing, highlighting the need to avoid external financing for public investment projects unless local companies demonstrate technical and financial capacity to execute
The Government, seeking to alleviate the impact of debt on public spending, aims to reduce its weight to 45% by 2026.
The measure is included in the Medium-Term Debt Strategy 2024-2026, approved by Presidential Decree 52/24.
The Strategy guides the Government’s objectives, prioritizing loans with longer terms and grace periods of at least five years.
Between January 2022 and June 2023, 25% of total disbursements were exclusive concessions from the World Bank, according to official data from the Public Finance Sustainability Law. This approach aims to optimize the cost and maturity of the debt, in line with the search for semi-confessional financing in terms of external debt.
The strategy includes non-collateralization in commodities, avoiding the commitment of debt in exchange for oil.
It is also proposed to limit the concentration of debt service in the short and medium term, seeking to reduce the current proportion from 63% to 45%.
Responsible financial management is emphasized, with the goal of not increasing expenses through contracting new financing.
Any financial slack resulting from liability management will be directed towards strengthening the treasury position, while additional tax expenditures will depend exclusively on ordinary revenues.
According to the document, to smooth the debt maturity profile, the strategy favors the contracting of external financing with repayment terms between 15 and 20 years, accompanied by a grace period of at least five years.
Furthermore, the search for a balance between internal and external financing is evident in the strategy, highlighting the need to avoid external financing for public investment projects unless local companies demonstrate the technical and financial capacity for execution.
Economist defends viable strategy
In reaction, economist Eduardo Manuel considered that the strategy is viable, and that Angola, by having more time to repay creditors and take out semi-concessional loans, will be able to have more time to make the loans taken out for economic diversification programs profitable.
The country will be able to obtain financing, he continued, aimed at specific projects, in addition, the longer deadlines will help reduce the installments of amounts payable to creditors.
Regarding the non-engagement of financing based on commodities such as oil, the expert emphasizes that this will force Angola to present alternative guarantees that are accepted by creditors, such as an agreement between financial institutions and the Government.
Eduardo Manuel emphasized that limiting the concentration of debt service in the short and medium term will force Angola to fulfill its commitments in shorter terms, which may not be beneficial at this time, taking into account that a longer term is needed.
“The current economic situation we are experiencing is not favorable to the balance between internal and external financing, as the liquidity of the financial sector and the level of internal savings are not yet sufficient to give up external financing”, he explained.
He explains that for this to happen, there needs to be a higher level of internal savings, that is, the level of bank deposits will have to increase, and the banks, autonomously, will have to have liquidity to satisfy loan requests that are made. requested.
By: Francisca Parente
