GS Goldman Sachs Group Inc

By Margot Patrick and Patrick McGroarty 

LONDON--Angola is tapping international lenders for roughly $1 billion of new loans, including one for food and medicine, as Africa's biggest oil producer tries to cope with the fall in global crude oil prices.

Goldman Sachs Group Inc. is arranging a syndicated loan that is part-guaranteed by the World Bank, while London investment firm Gemcorp Capital LLP is separately providing dollar financing to the country to import food, medicine and other necessities, people familiar with the loans said this week.

The fresh funds signal that investors are confident Angola can ride out the oil slump that took hold two years ago, and come as the country awaits a potential $4.5 billion from the International Monetary Fund. A halving in crude prices has cut Angola's government revenues and economic growth in half, prompting drastic government spending cuts and a dollar shortage in the country.

Angola draws nearly all export earnings and 80% of government revenue from crude sales, and it surpassed Nigeria as the continent's top oil producer this year thanks to militant attacks on pipelines and rigs in the Niger Delta.

The syndicated loan Goldman Sachs is working on builds upon a commitment the World Bank made a year ago to support Angola in reforming and diversifying its economy with a $450 million loan and a $200 million guarantee. Goldman Sachs is now structuring a syndicated loan that will encompass that $200 million guarantee for a loan of roughly $500 million to $600 million, a person familiar with the matter said.

The World Bank said no one was available on Thursday to comment.

The Gemcorp facility could reach hundreds of millions of dollars in size depending on the government's needs to import specific goods into the country, people familiar with that loan said.

Businesses and the government alike have struggled to find dollars for imports this year. One U.S. dollar on the black market costs as much as 600 Angolan kwanza, compared with an official rate of 166 to the greenback. Following a two-week visit to the country, an IMF official said last week that the government has taken important steps in cutting spending but needs to adjust its currency and contain an inflation rate that is running at 29%.

Angola's economy rode a yearslong spike in oil prices to become an ostentatious symbol of Africa's growing wealth. Its Atlantic Coast capital, Luanda, earned a reputation as the world's most expensive city for expatriates, checkered with $400-a-night hotels and $200-a-plate beachside bistros.

Angola's President José Eduardo dos Santos, in power since 1979, cultivated close ties with Beijing, trading nearly a million barrels of crude each day for Chinese-built apartment blocks, railroads and highways across the huge tropical country.

Borrowings from Chinese banks helped double the government's external debt between 2010 and 2014 to $19.5 billion, according to a filing for Angola's first Eurobond last year. It has also taken out loans from several European banks and private lenders including LUMINAR Finance Ltd., a Swiss-run company incorporated in the British Virgin Islands, and Gemcorp, a direct lender to emerging-market governments and companies, the filing showed.

Angolan Finance Ministry didn't respond to requests for comment on the new loans. Angolan Finance Minister Armando Manuel told The Wall Street Journal in March that debt levels were manageable.

In 2015, the government reduced spending by a third, and Mr. Manuel in the March interview said further cuts would be made to its budget this year. In January, the government eliminated a popular fuel subsidy.

Stuart Culverhouse, an economist with Exotix, a London-based frontier fund and advisory firm, said Angola bolstered its reputation with international investors by taking steps to address the effects of the oil shock.

"To their credit, the authorities have seen a big macro adjustment since the oil price began to fall in 2014 and have devalued the kwanza, tightened monetary policy and tightened fiscal policy as well," Mr. Culverhouse said.

Write to Margot Patrick at margot.patrick@wsj.com and Patrick McGroarty at patrick.mcgroarty@wsj.com

(END) Dow Jones Newswires

June 23, 2016 11:18 ET (15:18 GMT)

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