Angola’s finance minister announced on Monday that the government is considering a gradual reduction in fuel subsidies as a precautionary measure to prevent a recurrence of the protests that occurred in June. These protests erupted following a substantial increase in petrol prices, resulting in the unfortunate loss of at least five lives.
Vera Daves de Sousa, speaking during an interview on the sidelines of the Annual Meetings of the International Monetary Fund and World Bank, revealed that internal discussions are ongoing regarding the potential extension of the end-2025 deadline for the gradual phase-out of subsidies. As of now, no final decision has been reached on this matter.
Governments across Africa are grappling with the challenges of mounting debt expenses and elevated fuel prices, prompting them to undertake the complex task of phasing out expensive subsidies.
However, these measures have encountered significant resistance and discontent in various nations, including Senegal and Nigeria.
Vera Daves de Sousa highlighted the importance of learning from past experiences when fuel prices saw a significant surge, which led to a societal shock. Notably, in 2022, Angola allocated a substantial 1.9 trillion kwanza (equivalent to $2.3 billion), surpassing 40% of the IMF’s estimated expenditure on social programs, to fuel subsidies.
The anticipated economic growth for this year has been adjusted significantly, with projections now standing at just 1.09%, a notable decline from the initial forecast of 3.3% outlined in the 2023 budget. This downward revision can be attributed to a reduction in oil production, resulting in a contraction of the oil sector. Looking ahead, the forecast for 2024 is modest, with expectations set at 1.5%.
The 2023 budget was initially based on an assumption of oil production at 1.1 million barrels per day. However, the current oil production is ranging between 1 and 1.1 million barrels per day, which has prompted a need for adjustment.
Daves de Sousa noted that the assumption for the 2024 budget would likely be set at a level lower than that of the previous budget to account for this uncertainty in oil production.