• Angola weighs extending $1B JPMorgan swap deal expiring in 2025

• Oil price drop triggered $200M margin call; debt nears 60% GDP

• IMF urges fiscal discipline as growth slows, deficit widens to 2.8%
  

The Angolan government faces a strategic decision by November on whether to extend its financing deal with U.S. bank JPMorgan, as the country seeks to lower its debt costs and improve financial transparency.

Signed in December 2024, the agreement is a $1 billion "total return swap" backed by $1.9 billion in sovereign bonds. In essence, Angola used a portion of its previously issued Eurobonds as collateral to quickly secure liquidity from JPMorgan. If the value of those bonds drops, the country must provide additional funds to compensate, as it did in April with a $200 million margin call. The unconventional deal for an African state is set to expire at the end of the year.

"We have several options: refinance in the markets, partially repay, or extend the existing arrangement," said Dorivaldo Teixeira, Director General of the Public Debt Management Unit.

Angola is currently paying about 9% on this instrument, compared to nearly 10% on its Eurobonds. Teixeira indicated that the choice will depend on market conditions. "If I can extend it at a lower cost, I probably will," he said in London on the sidelines of meetings with investors.

The contract drew attention in April when a decline in oil prices led to the $200 million margin call. In the short term, Luanda also faces an $860 million Eurobond maturity in 2015.

Oil Pressure and Fiscal Caution

Angola's fiscal sustainability remains closely tied to oil prices, which account for over 90% of the country's exports. With Brent crude falling to around $67 a barrel—below the $70 a barrel assumption in the 2025 budget—authorities are considering a more conservative approach for 2026 to avoid forced spending revisions.

According to the International Monetary Fund (IMF), the economy grew by 4.4% in 2024, but growth is projected to slow to 2.1% in 2025, hurt by an expected drop in oil exports and more difficult access to external financing. While inflation, at 31% in 2024, has fallen to 19.5% by mid-2025, it remains a significant challenge for monetary policy.

On the fiscal front, gross public debt is near 60% of GDP. External debt service will exceed $10 billion in 2025, an amount equivalent to annual oil tax revenues. The deficit is expected to widen to 2.8% of GDP, up from 1% in 2024, due to the dual impact of lower oil prices and higher investment spending.

Given this fragile equation, the IMF is urging Luanda to maintain strict fiscal discipline by rationalizing spending, boosting revenue collection, and moving forward with fuel subsidy reforms, which have been postponed until 2028.

Fiacre E. Kakpo