Angola: Selected Issues

This Selected Issues paper aims to analyze the determinants of sovereign spreads for Angola and investigate the potential bias against the country. This paper examines the determinants of sovereign borrowing costs and their relative contributions in order to inform policy reforms aimed at reducing borrowing costs and improving foreign exchange liquidity management. The analysis builds on a growing body of empirical literature focused on sovereign bond issuance and spreads in emerging market and developing economies (EMDEs), particularly in Sub-Saharan Africa. The study also investigates the existence of an Angola-specific “risk premium” by estimating country-fixed effects within a panel regression framework. Empirical findings show that domestic factors—especially governance quality, public debt levels, and inflation—are the most significant determinants of sovereign spreads. Strong governance structures, sustainable debt positions, and stable inflation are identified as essential conditions for lowering sovereign borrowing costs in Angola and other EMDEs. Among the various domestic pull factors considered, governance, debt sustainability, and inflation consistently emerge as the most influential drivers of sovereign spreads and investor perceptions in international financial markets.