Angola begins paying off debts owed to building firms

LUANDA (Reuters) - Angola said on Thursday it had paid $1.28 billion of a government-estimated $6.8 billion in overdue bills to local and foreign builders in the southern African nation as it tries to restore investor credibility.

The Finance Ministry has paid 100 construction firms both at home and overseas, a list of the firms published on the finance ministry's website (www.minfin.gv.ao) showed.

The bills began to pile up in 2008 after a sharp drop in oil prices hit the nation's coffers. Angola, which ended a civil war in 2002, has come to rival Nigeria as Africa's biggest oil producer, but it relies on oil for 80 percent of its official revenues.

In July, President Jose Eduardo dos Santos said his government would pay small and medium-sized building firms in full in about two months, while big building firms would receive 40 percent of what they are owed this year and the rest in one or two years.

These foreign firms include Portugal's biggest builder, Mota Engil, as well as Teixeira Duarte and Brazil's Odebrecht.

Although the government now says it owes $6.8 billion to construction firms -- about three times the amount initially estimated -- it has admitted to having received requests from building firms to pay up to $9 billion in late bills.

Angola's shock admission of the massive unpaid building bills has sunk any immediate chance of it issuing up to $4 billion in foreign debt, analysts said.

Even though it produces 1.5 million barrels or more of oil a day, $9 billion is a large sum for the country of 16 million, equating to a quarter of the annual budget and nearly two-thirds of stated foreign exchange reserves.