Fitch Warns Angola of Fiscal Risks Before 2027 Elections
The rating agency Fitch Ratings has warned of potential “fiscal slippage” in Angola as the country approaches its 2027 general elections. Analysts expressed concern that the government may abandon fiscal discipline in an attempt to win over an increasingly competitive electorate.
Historical Spending Patterns Sound Alarms
During a seminar on African economic trends titled ‘Can the positive momentum in African ratings survive geopolitical headwinds?’, Fitch analyst Gabriel Comolet highlighted a worrying historical trend. He noted that previous Angolan elections have been marked by sharp increases in public spending, including wage hikes for civil servants and the suspension of critical reforms, such as the removal of fuel subsidies.
“What concerns us most is the historical pattern of increased spending and a halt in fuel subsidy reforms, which is the most visible measure of fiscal restraint,” Comolet said. He emphasized that as the political landscape becomes more contested, the pressure to increase popular spending grows.
A Competitive Political Landscape
The warning comes as the ruling party faces its most significant political challenge since the end of the civil war. Fitch noted that the main opposition party, UNITA, has gained ground in every recent election, with the 2022 results being the closest in the nation’s history. With the opposition already raising concerns regarding the integrity of the upcoming 2027 vote, the government may feel pressured to bolster its support through fiscal expansion.
Balancing Oil Gains Against Economic Risks
In its latest assessment, Fitch maintained Angola’s credit rating at ‘B-‘ with a stable outlook. While higher global oil prices could provide a windfall for the nation’s treasury—supporting external reserves and consolidation—this potential upside is frequently negated by “spending slippage.”
Furthermore, Fitch analysts warned that the anticipated recovery in domestic oil production remains uncertain. This volatility, combined with high inflation and a heavy reliance on commodity exports, keeps Angola firmly in “junk” territory, well below investment grade.
Key Challenges for the Angolan Economy:
- Governance: Persistently low indicators for institutional quality.
- Debt: High levels of public debt denominated in foreign currency.
- Inflation: Sustained high prices impacting the cost of living.
- Commodity Dependency: One of the highest levels of economic reliance on a single sector among all rated nations.
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