Angola is Africa’s second-largest oil exporter but falling demand and an oil-price war threaten to derail the country’s oil-dependent economy.
Oil is responsible for two-thirds of Angola’s tax revenue and 95 percent of its exports, according to the International Monetary Fund.
John Ashbourne, a senior emerging markets economist at Capital Economics, said that Angola’s “biggest economic hit will come from lower oil prices”.
“Indeed, Angola may suffer a bigger fall in GDP than anywhere outside the worst-affected Asian countries,” Ashbourne predicted.
A combination of a coronavirus-related decrease in demand for oil and a price war between Saudi Arabia and Russia has resulted in the largest drop in crude oil prices since the Gulf War in 1991, CNBCAfrica reports.
The coronavirus has affected the demand for oil globally. China is the world’s largest oil importer and Angola’s biggest export market.
The COVID-19 coronavirus, which originated in Wuhan, China, has killed more than 5,000 people and continues to spread globally.
The need to contain the virus in China led to travel restrictions and factories being shut in January and February, reducing demand for oil, GulfNews reports.
In 2017, Angola sold 67 percent of its oil — worth $18 billion — to China.
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Heavily-indebted Angola has signed resource-backed loans worth around $22.8 billion with Chinese lenders. This means that the repayment of the loans comes from income from the country’s crude oil.
With lower oil prices, Angola will be forced to pump more oil to repay the loans owed to China.