Angolan Minister of State for Economic Coordination Manuel Nunes Junior announced on Thursday in Luanda, the capital of Angola, the gradual removal of fuel subsidies.
This will result in the price of gasoline increasing from the current 160 Kwanzas (about 0.27 U.S. dollars) per liter to 300 Kwanzas (about 0.51 U.S. dollars) per liter, an 87.5 percent increase, starting from 1:00 am on Friday.
The prices of other petroleum-derived fuels, such as diesel, illuminating oil, and cooking oil, will remain unchanged.
The minister said the removal of fuel subsidies is “a necessary measure to promote solid economic growth capable of addressing the serious problems facing the country.”
According to him, Angola’s expenditures on fuel subsidies amounted to 3.8 billion U.S. dollars in 2022.
Minister of Finance of Angola Vera Daves affirmed that removing fuel subsidies was a sovereign decision of the Angolan state and was not influenced by external pressure from the International Monetary Fund.
According to a government report obtained by Xinhua Thursday, Angola’s Ministry of Finance has put forth a proposal for a phased reduction of gasoline subsidies beginning in the second quarter of 2023. The report also suggested a partial and progressive removal of the subsidy on diesel and illuminating oil prices, with the process expected to continue until 2025.
With the complete removal of subsidies for diesel and gasoline, Angola will still maintain a competitive oil pricing within the region, according to the report.
The report indicated that fuel subsidies adversely impact public finances, generating increasing and unsustainable fiscal costs in the medium and long term, hampering the country’s financial capacity to invest in basic services and social development projects.
It also mentioned that the continuation of subsidies threatens the downstream sector of the oil industry and encourages smuggling oil to neighboring countries, with prices 70 percent higher than those in Angola.
By December 2022, market gasoline and diesel prices were 202 percent and 279 percent higher than subsidized prices in Angola. Fuel subsidies in 2022 accounted for about 92 percent of the country’s health and education expenses in the same year. They could reach approximately 3.5 percent of 2022’s gross domestic product and about 20 percent of the projected general budget for 2023 in Angola, read the report.
Due to the “significant impact of the removal of fuel subsidies on inflation and household solvency,” the report proposed mitigation measures to reallocate those subsidies to energy, public transportation, and social programs.
According to updated data from the Global Petrol Prices website at the end of May, after the increase in gasoline prices in Angola, the country will go from being the fourth cheapest in the world to the tenth cheapest in terms of gasoline prices.
According to a report released on May 11 by the Organization of the Petroleum Exporting Countries, Angola is Africa’s top crude oil producer, with a daily production of 1.06 million barrels in April.
Most of the fuels consumed in Angola are imported; only the Luanda refinery is currently operational in the country, while the Lobito, Cabinda, and Soyo refineries are still under construction.