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IMF warns of excessive debt after cutting Angola's economic growth forecast

IMF reduced Angola’s economic growth projection for 2025 from 2.4% to 2.1% on the back lower oil exports. The IMF warned on Friday that the risks had increased from last year in regard to the Southern African country’s ability to pay its bills.

Angola must also embrace greater flexibility in its foreign exchange rate, according to the IMF.

The IMF made the statement after reviewing the findings of an assessment mission conducted by staff in Luanda, Angola, in May. At that time the Fund had already reduced Angola's initial growth forecast for this year to 3%.

The IMF stated that "Angola was hit by the volatility of oil prices, sovereign spreads and weakness in oil production during the first half 2025, which amplified the impact of these shocks."

Angola, a small and open African economy that exports oil, has also faced difficulties this year when U.S. tariffs on trade roiled the financial markets.

IMF warned Angola that the risks of this view had increased since last year. The IMF warned Angola against two unsustainable financing options, including too much internal debt and expensive short-term external loans.

The IMF warned that "excessive reliance" on domestic finance "risks further increasing the banks' exposure to sovereign debt", while "short-term solutions can lead to an accumulation of onerous debt service and undermine investor confidence."

Angola was forced to pay JPMorgan $200 million extra in April, after the bond it uses as collateral to secure a loan with the Wall Street lender fell along with the value of other frontier assets.

The bond's price rose and the money was refunded.

Technically, the May visit by IMF officials to Luanda was a Post Financing Assessment. This is reserved for countries with outstanding credits above their quotas who do not have a program supported by IMF or monitored by staff.

The IMF stated that Angola is facing challenges due to a possible drop in crude oil prices and tighter external financing conditions. The government is also rushing to reduce the amount of oil-backed loan to China in order to ease pressure on its finances. Reporting by Miguel Gomes and Rodrigo Campos, Luanda; additional reporting by Duncan Miriri and editing by Karohecker Strohecker & Paul Simao

(source: Reuters)