The analyst at the credit rating agency Fitch who monitors Angola’s economy warned today of the risk of budget slippage due to the elections scheduled to take place by August 2027.
“What concerns us most is the historical pattern of rising spending, salary increases for civil servants, and a halt to the reform of fuel subsidies, which is the most visible measure of fiscal restraint,” said analyst Gabriel Comolet during a seminar on the evolution of African economies.
Titled “Can the positive momentum in African ratings survive adverse geopolitical winds?”, the online seminar reviewed the evolution of ratings in the region, including Angola, Cape Verde, and Mozambique, all of which are below investment grade.
Regarding Angola, one of the four countries analyzed in detail at the meeting, Fitch Ratings expressed concern about the impact of the election period on public spending control and noted that elections are becoming increasingly competitive.
“The electoral landscape in Angola is increasingly competitive; UNITA has gained ground in every election, and the 2022 results were the closest since the end of the civil war, and the opposition has already expressed concern about the integrity of the electoral process,” said Gabriel Comolet, warning that “if historical trends hold, we foresee an increase in spending.”
In its latest assessment of the country, conducted a month ago, Fitch Ratings decided to maintain Angola’s rating at B- with a stable outlook, highlighting the risk of “spending slippage” due to next year’s elections.
“The stable outlook reflects our view that the risks to the rating are broadly balanced; higher oil prices could generate windfall revenues, supporting fiscal consolidation and foreign reserves, but this upside potential is offset by the risk of spending slippage, particularly in the run-up to the 2027 elections,” the agency stated at the time.
In the note, analysts also warn that “the expected recovery in oil production remains uncertain and could potentially offset some of the gains.”
Fitch Ratings decided to maintain its assessment of the country’s ability to meet its financial obligations, keeping the rating at B-, below investment grade, or “junk” as it is commonly referred to, due to “weak governance indicators, high inflation, high levels of foreign-currency public debt, and one of the highest dependencies on raw materials among the countries assessed.”
Source: Lusa
