Angola plans to pursue a debt-for-health swap this year as part of a broader borrowing strategy that also includes World Bank support and a bond sale on international markets, the finance ministry said on Tuesday.
According to Reuters, debt swap agreements, which tie financing to social or environmental outcomes, are becoming increasingly popular across developing countries.
Similar deals have been used in recent years by Belize, Ecuador and Ivory Coast.
In Angola’s case, a debt-for-health swap would allow the government to replace more expensive debt with lower-cost financing, provided the savings are directed toward the health sector.
The Southern African oil producer has been trying to rein in its debt levels after years of heavy borrowing, including oil-backed loans from China, left it spending more than 40% of this year’s budget on debt servicing.
According to the ministry’s annual borrowing plan, presented to the media on Tuesday, the main objective of debt policy is “minimising financing costs over the long term.”
Under the plan, the government aims to secure about $1.4 billion in commercial financing, which includes the proposed debt swap, although no specific details of the swap were disclosed.
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The government is also counting on $500 million in funding through a World Bank Development Policy Operation, which provides direct budget support to eligible countries, to help close this year’s fiscal gap.
In addition, Angola plans to raise another $1.7 billion from international capital markets, while some external borrowing will also come from bilateral lenders and export credit agencies.
The finance ministry said Angola’s total debt is expected to fall to 45% of GDP by the end of this year, down from 47% in 2025.
The improvement follows an update by the national statistics office to the base year used to calculate economic output.
While rebasing GDP is an internationally accepted practice designed to reflect new industries and structural changes in the economy, economists sometimes question sharp improvements in debt-to-GDP ratios that result from such revisions.
In December, the International Monetary Fund forecast that Angola’s economic growth would remain subdued at around 2% this year, with a gradual recovery over the medium term dependent on progress in diversifying the economy away from oil.
The government in Luanda is also seeking to strengthen public finances by cutting subsidies and opening up its state-dominated economy to greater private investment.
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