Angola is evaluating its financial strategy for the upcoming year, with a critical decision point looming by November regarding a substantial $1 billion derivative contract with JPMorgan. This agreement, a total return swap that matured at the end of 2023, is backed by a significant portion of Angolan government dollar bonds. The nation is weighing options that include renewing the existing arrangement, seeking funds through international capital markets, or a combination of both, aiming to secure the most economically favorable terms for its sovereign debt.
The current total return swap, established in December and expiring this year, involved $1.9 billion in Angolan government dollar bonds as collateral. Dorivaldo Teixeira, General Director of the Public Debt Management Unit at Angola’s finance ministry, indicated that the decision will be heavily influenced by prevailing market conditions and cost considerations. While acknowledging an improvement in market access for emerging and potentially riskier issuers, with yields trending downwards, Teixeira highlighted that the existing JPMorgan facility offered a more attractive cost than Angola’s sovereign Eurobonds. Consequently, he suggested that extending the current arrangement would be a probable course of action if the terms remain competitive.
Angola’s sovereign international bonds currently exhibit a yield of approximately 10%, according to data from JPMorgan’s EMBI index. Despite the improving market sentiment, Teixeira expressed the country’s intent to negotiate a more favorable rate than the 9% currently paid on the total return swap, regardless of whether the renewed agreement is with JPMorgan or achieved through market issuance. The specific financial terms of the total return swap have not been publicly disclosed.
The initial total return swap drew considerable attention in April when Angola was compelled to deposit an additional $200 million with JPMorgan. This requirement served as further security for the collateralized bond, triggered by a margin call following a sharp decline in oil prices, which in turn negatively impacted Angola’s sovereign bonds amidst broader market volatility. Separately, Angola is also slated to repay over $860 million on a dollar-denominated bond issued in 2015, with this repayment due in November.
In parallel with its debt management activities, Angola’s finance ministry is undertaking efforts to enhance transparency in its public debt reporting. Teixeira stated that the ministry has begun publishing its debt bulletin on a quarterly basis and aims to transition to monthly publications next year. Crucially, efforts are being made to ensure that key debt-related information and statistics are accessible in both English and Portuguese, a move intended to improve investor confidence and potentially lower borrowing costs by addressing perceptions of risk that may have been heightened by limited communication.
On the fiscal front, Angolan finance officials are advocating for a more conservative oil price assumption in the budget planning for 2026. This push comes after the government experienced challenges in its 2025 spending projections, which had to be stress-tested due to a significant drop in oil prices that fell below the initial assumption of $70 per barrel.
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