La vue d'ensemble
The Bank Nacional de Angola decided to keep its benchmark rate unchanged at 8.75%.
The Nacional Bank of Angola decided to leave its key rate unchanged at 9.25%. For more information, please consult the press release from the Monetary Policy Committee.
The Bank Nacional of Angola has decided to keep its key rate unchanged at 9.25%.
For the full report of the Monetary Policy Committee Decision, please visit the
Debt vs GDP / Bonds vs bills
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All Data - Angola
|GDP (billions US$)||125.43||142.74||147.55||-||-||-|
|Total Outstanding Amount (Billion US$)||6.26||8.61||-||-||-||-|
|Outstanding Amount/GDP (%)||4.99%||6.03%||0.00%||-||-||-|
Having come from a period civil unrest about a decade ago, Angola is still very much on its recovery path. Angola has continued to record the most impressive economic growth within the continent averaging at 15% between 2002 and 2010. However, despite all the gains made by Angola during its economic boom, money and capital instruments remain inaccessible to many with the non-existence of a stock exchange market.
The country has 18 commercial banks of which two are privately owned and three are state run. Only 10% of the population use banking facilities and few businesses apply for loans as current conditions are not conducive to lending.
The slow growth of the bond market in Angola is further suppressed by the lack of a stock exchange which could provide the much needed infrastructure to propel growth in the domestic money markets. However, there have been efforts to establish a stock exchange in Angola. The legal and regulatory framework has been put in place for the opening of the stock exchange. The national stock exchange will be referred to as the Bolsa de volaros e derivatives de Angola (BVDA). It will be regulated by the Capital Markets Commission, which will also regulate financial service providers such as brokers, traders, and mutual fund managers.
Despite the shallowness of the debt market in Angola, the bond market has continued to experience positive reception domestically. The banks consist of the bulk of investors who are players in the primary market. A key driving factor for the issuance of government bonds is to diversify state revenues in order to avoid over reliance on the two main exports i.e. oil and diamonds. The need for infrastructure development is also a key driving factor for bond issuance.
In a bid to manage the country’s debt and reduce its budget deficit, Angola was set to issue its first sovereign bond worth $4 billion in May 2010. Unfortunately this was not realised. The country’s high dependence on oil revenue, which has been perceived as highly risky by foreign investor, was attributed to the postponement of the bond issue. However, it is worthwhile to note that the government has put in place fiscal adjustment measures which have already made noticeable change with the reduction of public debt from USD 13.9 billion in 2008 to USD 12.7 billion in 2010.
Politique monétaire et gestion de la dette publique
Currently, the Ministry of Finance, in collaboration with the Banco Nacional de Angola (BNA), monitors and directs the management of public debt. This includes publishing of statistics and quotations and trading of Treasury bonds as well as issuing of instructions necessary for the operation and regulation of the market. Government efforts are however underway for the creation of a regularization body for public debt aimed at ensuring more liquidity in the securities market.
The BNA is mandated to protect the value of the currency using conventional policy instruments such as reserve requirements, interest rates used in repo transactions, credit limits, and maximum interest rates at which financial institutions can deal with their customers. The BNA has used foreign exchange reserves to sterilise excess liquidity within the economy and manage high inflation since 2003.
The use of interest rates as a monetary policy tool to manage inflation is generally ineffective as the country’s financial markets are largely underdeveloped. Central bank intervention does not appear to be sustainable in the long term due to the volatility in oil price earnings, and prudent fiscal policy management is required to manage excess liquidity more effectively. Despite an increase in the issuance of government debt, state initiatives have been undermined by the rapid growth in base money.
Prior to 2010, treasury bills were issued to finance treasury cash flows. However, this has now changed and these instruments are now used as tools for monetary policy. Treasury bills are issued with maturities of 28, 63, 91, 182 and 364 days with their current interest rates ranging between 13-18% per annum.
Structure du marché
Government securities are issued by the Banco Nacional de Angola (BNA) on behalf of the government. Most of these bonds are bought and held by local banks. Treasury bills are available through the BNA to commercial banks and, indirectly, to their customers.
The government issues treasury bonds (known as Obrigações do Tesouro) on a monthly basis to finance designated budget requirements. Most of these bonds are bought and held by local Angolan banks. The tenors range from 1 to 12 years and are issued in hard currency (US$) as well as in local currency (kwanza). The interest rates on the treasury bonds are pre-determined by the treasury which then instructs the BNA to issue the securities as specified. The yield curve is therefore not market determined and thus cannot be used as a benchmark or tool to price other debt instruments.
The BNA also has a market for short-term bonds (called Títulos do Banco Central). The Títulos have maturities of 28-days to 365-days. The size of the TBC issues range from AOA 100,000 and AOA50m and are issued weekly. The take-up of T-bills issued at weekly auctions is typically below 15% of the total amount offered, mainly because investors perceived the yields on the T-bills, usually 3% – 5% above LIBOR, as unattractive. The finance ministry is expected to sell inflation-linked T-bills as an alternative, which will presumably offer much higher returns given persistently high levels of inflation.
- The following securities are issued in Angola:
- Treasury Bonds
- Treasury Bills
- Savings Certificates
- Special Certificates of Public Debt
- Promissory Notes
The Market rules and procedures are contained in instruction number 09/2003 which gives details on the issuance of direct public debt and the Ministry of Finance’s website.
The tax on government and corporate bonds for foreign investors is 20%. For dividends a withholding tax of 10% applies. Interest paid to a resident or non-resident is levied at 15% incentive tax. This rate may however be reduced to 2.5% but only under an incentive package for which one must place an application.
Primary and secondary markets
With the fixed income market still at its infancy stages, there is virtually no activity in the secondary market. The growth of a secondary market is further diminished by the buy and hold tendency by the primary market investors. Minimal trading sometimes occurs across banking and corporate institutions. It is anticipated that the launch of a stock exchange market in the near future will create a platform for the trading of bonds in the secondary market.
The investor base in Angola is not as diversified as the government would have wished, with the banking sector taking up a lion’s share of the government securities. As a result, investment in government bonds forms a significant portion of reported profits in the banking sector. Investment in the debt market is however not limited to banking institutions but also includes participation by local pension funds, hedge funds, the central bank and mining and oil companies.
Clearing, settlement and custody
Trading of government bonds in Angola is currently handled entirely by the BNA. It is also expected that the government is likely to seed some of its long term bond using the BVDA platform upon its launch.
Guide d’achat des obligations
Openness to international investors
The capital market is generally restricted to local investors. Moreover, foreign participation in the bond market is highly restricted. It is also anticipated that foreign investors will not be major players in the stock exchange activities, if the exchange controls remain in place as they are.
In 2003, the Angolan government through its National Private Investment Agency (NPIA) set out the Basic Laws for Private Investment (BLPI), which is meant to facilitate the injection of foreign investments into the country. The law provides for equal treatment of foreign investors. It also offers incentives and sets capital investments. Unfortunately the qualification process is marred by several bureaucratic hurdles. Angola is also tainted with pervasive corruption which naturally causes foreign investors to shy off from investing in the country.
Angola has exchange control regulations, which are managed and supervised by the Banco Nacional de Angolahttp://www.bna.ao/. The kwanza is not a convertible currency and the exchange rate system is a fixed peg. However, in 2003, the BNA introduced the exchange rate stabilisation programme using foreign exchange reserves to remove excess liquidity from the system. The central bank managed to keep the exchange rate stable around 1USD-78AOA until the first quarter of 2009. The BNA actively intervened in the FX markets by controlling the amount of dollars it supplied to commercial banks. In April 2009 the currency came under pressure as poor foreign exchange reserves limited the BNA’s ability to protect the kwanza from depreciating. In October 2009, the BNA decided to loosen exchange controls and permit commercial banks to bid for US dollars at a rate below the de facto peg of 78. This was an indication of the BNA’s willingness to allow exchange rate volatility given the rise in the oil price, the loan from the IMF, and strong recovery in foreign exchange reserves.
It is worthwhile to note that Angola has been urged to move to a more flexible exchange rate regime as the economy diversifies from oil, de-dollarization occurs, domestic financial markets deepen, and monetary instruments are developed. The Bank has since introduced a market-determined auction system agreed with the IMF under a 27-month Stand-by Arrangement (SBA).
Procedures for market participation
Procedures to be followed during the buying of government securities differ from time to time as stipulated in the prospectus of an issue. However, the government has laid out some the procedures in a paper dubbed “Operations with Government Securities”. Notice No. 05/204 of the paper gives guidelines and conditions pertinent to the issuance of government securities in detail.
Restrictions on foreign exchange and profit repatriation
While there are no restrictions on the amount of foreign currency that can be brought into the country, exportation of the kwanza is restricted, if not prohibited. The repatriation of dividends to foreign countries is only permitted if the amount of investment in the Angolan host company exceeds US$250,000. Capital may also be repatriated but with prior approval from the BNA. Dividends are annually transferable after approval by the BNA.
Protection of investors
Angolan law recognizes the protection of intellectual property rights. Angola’s National Assembly adopted the Paris Convention for the Protection of Industrial Intellectual Property in August 2005, incorporating the 1979 text and the patent cooperation treaty concluded in 1970 and amended in 1979 and 1984. The Ministry of Industry administers intellectual property rights for trademarks, patents and designs under Industrial Property Law 3/92.
However, Angola's legal and judicial system lacks capacity and is inefficient. Legal fees are high, and most businesses avoid taking commercial disputes to court. In the 2011 World Bank’s Doing Business survey, Angola ranks at 163 out of 183 on contract enforcement, and estimates that commercial contract enforcement, measured by time elapsed between filing a complaint and receiving restitution, takes an average of 1,011 days, at an average cost of 44% of the claim.
|Foreign currency: long term||FITCH||B+||19 May 2010|
|Foreign currency: short-term||FITCH||B||19 May 2010|
|Local Currency Long Term||FITCH||B+||19 May 2010|
|Country Ceiling||FITCH||B+||19 May 2010|
Moody’s, Standard & Poor’s (S&P) and Fitch Ratings were in the capital, Luanda, in March 2011 to assess the credit rating awarded to Angola last year. Angola received its first sovereign credit rating in May 2010, with S&P, Fitch and Moody’s placing its foreign currency rating in the B+ or B1 category, on par with Nigeria and Ghana and four levels below investment grade. S&P and Fitch both assigned a short-term B rating and a long-term B+ rating, with stable and positive outlooks respectively, while Moody’s assigned a B1 “not prime” rating with a positive outlook.
The ratings reflected the country’s conflicting outlook, with strong real GDP growth prospects, abundant natural resources and low levels of government and external debt being offset by concerns about poor governance and corruption, the lack of a clear successor to the president, weak infrastructure and the country’s heavy dependence on oil. Angola had been seeking a sovereign risk rating since the start of 2009, when its plan to issue sovereign debt on global markets first emerged. When the ratings were announced in May 2010 the government, which had been hoping for a slightly better rating, put on hold its plans to sell up to US$4bn of international bonds.
In a report released ahead of its latest visit in March this year, Moody’s indicated that it was placing Angola’s B1 foreign and local currency rating under review for possible upgrade. It noted that its latest rating action had been influenced by improvements to the budget and external accounts, on the back of the recovery in oil prices. Moody’s is expected to announce the conclusions of its review within the next three months.
The Economist Intelligence Unit currently places Angola in the B category for sovereign risk. The rating was lowered from BB in March, reflecting poor debt management—notably of domestic debt arrears. There is some hope that this rating deterioration could be reversed over the coming year. According to the government, arrears have already been reduced from a peak of US$5.7bn to US$2.7bn in March, with the remainder due to be paid off by December 2011.
Currently there are 20 commercial banks licensed by BNA all of which may act as primary dealers during issuance of government bonds.