Lack of detail in Angola’s debt deals with China could hide future risk

Three-year relief package with Exim Bank unlocks more IMF funding but agreements with two other Chinese banks may be less favourable

Short-term fiscal pressure reduced but total costs of servicing loans could be increased

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The Industrial and Commercial Bank of China is one of Angola’s largest creditors. Photo: Reuters

Published: 12:58pm, 18 Jan 2021Updated: 11:01pm, 18 Jan 2021

Angola, Africa’s largest destination by far for Chinese loans, 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.

The deal also helped to unlock US$487.5 million from the International Monetary Fund 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).