Asia > Eastern Asia > China > China’s aid is increasingly important for Angola

China: China’s aid is increasingly important for Angola

2015/07/05

China’s aid to Angola, through private projects that encourage economic diversification, has taken on an even additional significant role given Angola’s current budgetary problems, according to analysts.

Angola’s Ministry of Finance announced late last week that conditions for lending by Chinese national banks in China to Angola had been improved, but gave assurances it had not requested a moratorium on loan repayments.

The ministerial statement as well said that the Angolan ministers who joined the entourage of President Jose Eduardo dos Santos to China analysed with Chinese counterparts “ways to expand fiscal capacity” to proceed with the Angolan National Development Plan, “without compromising the current deficit portfolio, given the current situation of low oil prices.”

About the five-day presidential visit, which ended on 13 June, the Economist Intelligence Unit (EIU) noted the “openness” of a direct request for financial support by the Angolan President, which it said was a sign of the “seriousness of the economic situation” in the country.

“Although this visit included discussions on private sector investments, the focus was on securing new loans, showing that Angola may have further need of China than it cares to admit,” said the new statement by the EIU on Angola.

The fall in tax revenues due to the low price of oil, the depreciation of the kwanza, rising inflation and decreasing business confidence means Angola needs additional support, but the EIU warned of the need to keep deficit at acceptable levels.

Figures recently compiled by Reuters showed that China’s funding to Angola, inclunding the majority recent loans, by presently amounted to US$20 billion.

China is by presently Angola’s major trading partner and last year trade between the two nations totalled around US$37 billion.

The Africa Intelligence Monitor newsletter said Chinese financial aid was the “key element of the Angolan president’s trip,” but additional recently the conditions offered by China on its loans by presently reflect “the loss of price of the oil guarantee/collateral,” the newsletter said.

Similarly, the EIU said Chinese institutions were becoming additional “risk averse” in relation to credit lines to Angola.

During the visit, China committed to supporting Angolan economic diversification, with projects to include a hydroelectric plant built by China Gezhouba, a centre for railway training and a combined cycle power plant in Soyo.

The Angolan government as well revealed plans for Chinese banks to open branches in Angola, at a time at the same time as it is “additional willing than ever” to diversify the economy to new sectors and in which China’s capacity in terms of “experience and investment ” is particularly valued, said the EIU.

As well with Chinese capital, the China International Fund (inclunding China Sonangol), plans to start construction of the new northern Soyo refinery, which should be operational in 2017, with a processing capacity of 110,000 barrels of oil per day.

According to the EIU, the new project is “welcome” as it creates jobs and offers a higher added price to oil production, at a time at the same time as the country only refines 30 % of the fuel it consumes.

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