(Bloomberg) --

Angola is in talks with key lenders to reschedule debt payments after a prolonged recession triggered by a drop in crude prices raised concerns about the sustainability of the African nation’s finances.

The discussions have resumed after an interruption of about three months due to the Covid-19 pandemic, President Joao Lourenco said in a speech broadcast on state-controlled RNA Radio on Friday. He didn’t give details about the loans or specify if the talks included Eurobonds.

“The government started the renegotiation of our sovereign and commercial debt with the main credit institutions of Angola,” Lourenco said. “The results will be known in due course.”

Measures to fight the pandemic and a collapse in oil prices are expected to lead to a fifth consecutive annual contraction for the southwest African nation’s economy. Angola is the continent’s second-biggest crude producer and the fuel accounts for almost 90% of its exports.

In addition to Angola’s heavy dependence on oil, other threats to the country’s sustainability include its high level of debt and agreements with some of its major creditors that included crude as collateral for loans, the president said.

Lourenco seems to be reiterating plans to review current debt payment deals with countries like China, in which Angola has been using oil as a means to pay its debt, said Tiago Dionisio, a Lisbon-based analyst at Eaglestone Advisory SA.

“It’s not surprising that Angola will need to restructure its sovereign debt as well as delay the settlement of arrears given its current tight cash situation related to the latest sharp fall in oil prices and Covid-19 pandemic,” he said.

The country joins other African states in seeking debt relief as a global downturn and domestic measures to contain the coronavirus hit revenue. Nations are seeking to defer payments and secure funding from multilateral lenders, while others, like Zambia, are looking to restructure borrowing.

New Funding

Angola’s $1.5 billion bond due 2025 rose 0.3 cents to 67.84 cents on Friday, pushing the yield 13 basis points lower to 19.3%. The country has about $500 million in obligations on international bonds falling due this year.

Angola’s government debt is set to rise more than 22 percentage points to 132% of gross domestic product this year, according to International Monetary Fund forecasts.

“The most important supportive factor for Angola is the recovery in oil prices,” said Simon Quijano-Evans, the chief economist at Gemcorp Capital, which owns Sub-Saharan Africa debt. “Any relief on the bilateral debt front would provide extra breathing space and clear the way for new IMF funding.”

(Adds background on regional debt-relief measures in paragraph above New Funding subheadline.)

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