Oxford Economics has warned that the positive headline indicators in Angola’s 2027 state budget conceal a fragile fiscal position, underpinned by the country’s heavy dependence on oil revenues and the trajectory of international commodity markets, particularly crude oil prices.

“The aggregate figures mask Angola’s fragile fiscal position,” the consultancy’s analysts said in an assessment published on Tuesday, 3 November, noting that the impact of United States and Israeli strikes against Iran had helped ease pressures on Angolan sovereign debt.

According to Oxford Economics, the Middle East conflict boosted budget and export revenues, improved investor sentiment, and supported liability management operations. However, the consultancy cautioned that this improvement underscores Angola’s reliance on external oil market conditions.

“The sudden improvement in Angola’s fiscal outlook following the Middle East conflict highlights the country’s dependence on external oil market developments,” the analysts stated. Oxford Economics further warned that the country’s economic and fiscal outlook could deteriorate if peace negotiations between the parties involved in the conflict were to trigger a sharp fall in oil prices.

The Angolan government submitted its proposed 2027 state budget last week, valued at 37.34 trillion kwanzas, equivalent to approximately 36.4 billion euros — an increase of roughly 3.99 billion euros compared with the budget currently in force.

The document “seeks to maintain continuity with the main lines of the National Development Plan, while at the same time exercising financial prudence given the external context of significant challenges,” said José de Lima Massano, Minister of State for Economic Coordination.

The proposal sets total expenditure at 36.40 billion euros and targets economic growth of approximately 5.5%. The oil sector is expected to continue playing a central role in the economy, with estimated expansion of 7.1%. The government also anticipates a continued decline in inflation and has set a reference oil price of 71 US dollars per barrel.

“The consultancy warns that the country’s economic and fiscal outlook could deteriorate if peace negotiations between the parties involved in the conflict lead to a sharp fall in oil prices.”

Gross financing requirements for 2027 are projected at approximately 15.08 billion euros. According to José de Lima Massano, this figure could be reduced if the oil price exceeds the reference value set out in the proposal, in line with what has occurred during the execution of the 2026 budget.

In its analysis, Oxford Economics said the 2027 budget “reflects a cautious fiscal stance, with revenue and expenditure projections based on conservative assumptions regarding oil prices.” Despite this, the consultancy noted that significant risks to the country’s fiscal policy persist.

“The prudent budget conceals major risks to the country’s fiscal stance, as the fiscal trajectory remains contingent on oil market developments and external financing opportunities,” the analysts concluded.

Oxford Economics projects an average Brent crude price of 63.43 euros per barrel — significantly below the 85.95 euros per barrel assumed by the Angolan government in its 2027 state budget proposal.

Source: Diário Económico
Original article: https://www.diarioeconomico.co.mz/?p=558498