Consultancy firm Eurasia said today that Angola will not fully withdraw fuel subsidies until after 2025, and that it is moving slowly on this reform due to fears of protests, which will force it to cut public spending further.
“The subsidy reform will continue to progress slowly; due to deteriorating economic conditions and greater pressures on the cost of living, the authorities will probably adopt a more prudent timetable than initially announced, prioritising modest and gradual price increases,” wrote the consultancy’s analysts.
In a commentary on the progress of this reform, sent to clients and to which Lusa has had access, the analysts write that the government’s cautious approach to these changes “will probably push the reform timetable beyond 2025”, with the Executive able to resume petrol price increases in the second half of this year.
Last week, President João Lourenço decreed that subsidies on petrol used for regional travel and passenger transport would end on 30 April, “which increases the risk of protests, especially in Luanda”, warn the analysts, adding, however, that “widespread or prolonged protests remain unlikely”.
For Eurasia, the government could resume petrol price increases for all consumers from June, but progress on removing diesel subsidies, which was due to start this year, could be postponed until 2025, and is likely to be dependent on measures to mitigate inflation and the depreciation of the currency.
With the postponement, “public spending is likely to be higher than forecast in the 2024 Budget, so the authorities will have to cut spending in other areas or improve tax collection to meet budget targets,” the analysts write, concluding that “for now, the government should not seek a new International Monetary Fund programme, but engagement and technical cooperation with the Fund is likely to continue.”
Angolan President João Lourenço has taken another step towards removing fuel subsidies by ending the exemptions granted to some professional classes from 30 April, according to a decree published in the Diário da República.
On 1 June last year, the Angolan government announced the gradual withdrawal of fuel subsidies, starting with petrol, but exempting some economic activities.
When the fuel reform, repeatedly defended by the IMF, was launched at the beginning of last year, Angola was the fourth cheapest country in the world to fill up with petrol.
State spending on fuel subsidies is expected to have fallen by 200 million euros last year, according to the 2024 budget report, which predicts that in 2023 Angola will have spent around two billion euros on this item, a reduction of around 10 per cent compared to the 2.2 billion euros spent in 2022.
Lusa
