Moody’s Changes Angola’s Outlook to Positive, Cites Macro Stability
Moody’s Ratings has changed the outlook on the Government of Angola to positive from stable and affirmed the B3 long-term issuer and foreign-currency senior unsecured ratings.
The ratings agency said the change in outlook to positive reflects Angola’s emerging track record of greater macroeconomic stability through periods of both high and lower oil prices.
Despite higher fiscal deficits than in 2023-24, improved macroeconomic management is contributing to a decline in government debt and interest costs, which analysts expect at around 46% of GDP and 23% of revenue, respectively, by the end of 2026.
Moody’s said that if sustained by continued improvements in the effectiveness of monetary and foreign-exchange policy and support for non-oil economic activity, Angola’s greater resilience to external shocks and oil-sector volatility would reduce the risk of a renewed deterioration in government debt metrics and strengthen its sovereign credit profile.
The affirmation of Angola’s ratings reflects its continued economic and fiscal dependence on the oil sector, which remains a source of vulnerability despite improvements in macroeconomic management.
Angola’s exposure to oil price volatility is compounded by limited fiscal buffers and vulnerability to exchange-rate movements, given the large (around 80%) share of foreign-currency debt.
Although government debt is moderate, high interest costs limit fiscal flexibility, Moody’s said. These challenges are balanced by substantial oil, gas and mineral reserves, progress in economic diversification and reform implementation, and robust foreign-exchange reserves that help mitigate external risks.
Angola’s local currency (LC) and foreign currency (FC) country ceilings were raised to Ba3 and B2, respectively, from previously B1 and B3.
The now three-notch gap between the LC ceiling and the sovereign rating reflects the government’s still-significant, albeit declining, role in the economy, limitations in the predictability of institutions and government actions, and shared exposure by public and private sectors to developments in the hydrocarbon sector.
The continuing two-notch gap between the LC and FC ceilings reflects constraints on capital account openness and the economy’s exposure to foreign-currency pressures during periods of external stress.
Angola has demonstrated an emerging track record of greater macroeconomic stability through periods of both high and lower oil prices.
Conditions in the foreign exchange market have remained orderly since late 2024, supported by favourable, albeit volatile, oil prices, exchange-rate stability at around AOA 912 per US dollar, and foreign-exchange reserves broadly maintained at around $13 billion.
US Dollar liquidity in the domestic market has continued to increase. Monetary conditions have also improved, with inflation declining to 8.8% in August 2026 from 19% a year earlier.
Strong non-oil growth, which has exceeded 5% for the past two years, helped lift overall GDP growth to 8.7% year-on-year in the second quarter of 2026.
Together, these developments point to a more resilient economy and reduced vulnerability to external shocks. Combined with increasing but moderate fiscal deficits, improved macroeconomic management has contributed to a decline in government debt.
General government debt declined to 46.9% of GDP in 2025 from 53.0% in 2024, and Moody’s analysts expect it to fall further to around 45.6% of GDP by 2027.
Exchange-rate stability since late 2024 has also supported debt reduction by limiting increases in the local-currency value of foreign-currency debt.
Although fiscal deficits widened to around 4.1% of GDP in 2025 due to lower oil revenues and high capital expenditure, the authorities have continued to strengthen the sovereign balance sheet by accelerating the repayment of oil-backed debt.
Angola’s debt affordability has also improved and should strengthen further as oil revenues recover, although interest costs are likely to remain high at around 22%-23% of government revenue in 2026-27.
Some exchange-rate depreciation is likely towards the end of 2027; however, after around two years of broadly stable foreign-exchange conditions, the likelihood of a gradual and orderly adjustment has increased.
This would reduce the risk of the disruptive depreciation episodes that have historically weakened fiscal and debt metrics while preserving the exchange rate’s shock-absorption role.
Together, these developments increase confidence that recent gains in debt metrics will be maintained as oil prices gradually normalize, particularly if fiscal deficits moderate from elevated levels ahead of the 2027 elections.
The affirmation of Angola’s ratings reflects continued economic and fiscal dependence on the oil sector despite recent improvements in economic diversification.
Government revenue, export earnings and foreign-currency inflows remain heavily dependent on hydrocarbons, at around 60% and 80% respectively, exposing the sovereign to volatile oil prices and production.
While recent developments point to a more resilient economy and stronger fiscal position, a longer track record would be needed to demonstrate that these gains are more sustainably embedded in Angola’s economic and policy framework.
Weak debt affordability remains a key constraint on the rating despite the substantial reduction in the debt burden. Interest payments will continue to absorb around 22%-23% of government revenue over 2026-27, limiting fiscal flexibility.
A narrow non-oil revenue base, of around 6.4% of GDP in 2025, leaves government finances highly exposed to developments in the hydrocarbon sector and spending-led fiscal adjustment.
Although analysts expect debt affordability to improve gradually as interest burdens decline and oil revenue recovers, it will remain weak relative to similarly rated sovereigns. Institutional and governance weaknesses also continue to constrain credit strength.
While recent developments suggest that the authorities have achieved stronger policy outcomes in some areas, particularly in reducing inflation and maintaining stability in the foreign exchange market, the institutional framework remains relatively weak in managing oil dependence, and implementation capacity is uneven.
The regulatory framework and institutional capacity governing the hydrocarbon sector remain a relative strength and underpin its attractiveness to foreign investors. Fitch Affirms Angola at ‘B-‘ with Stable Outlook
