Key takeaways
- Angola spends more on fuel subsidies than on health or education, with $3.8 billion in 2022 alone.
- The government has compressed IMF’s six-year plan into just two years, heightening social and political risks.
- Despite being Africa’s second-largest oil producer, Angola imports 70% of its fuel consumption due to weak refining capacity.
- Fuel subsidy removal is tied to Angola’s refining expansion plans – new refineries must operate profitably without state support.
- Angola’s shrinking oil reserves and production raise doubts about whether future revenue can sustain stability.
A nation on edge – fuel protests in Luanda
In June 2023, the price of gasoline was raised by 88% in Angola – from 160 kwanzas/litre (US$0.22/litre at that time) to 300 kwanzas/L ($0.42/L) – leading to protests and fatalities.
In April 2024, diesel prices were boosted by 48% – from 140 kwanzas/L ($0.17/L) to 200 kwanzas/L ($0.24/L). Prior to 2023, fuel prices had not changed since 2016. At the time of the gasoline price increase, Angola Minister of Finance Vera Esperança dos Santos Daves de Sousa said the fuel subsidies might be slowed down beyond the end of 2025 after the partial removal led to deadly protests. However, she affirmed “We are taking out the fuel subsidies… End of 2025, we expect to see this process stabilize and close as much as possible…”
True to the minister’s word, on March 23, 2025, the Angolan government reduced subsidy on diesel by raising its price 50% from 200 kwanzas/L ($0.22/L) to 300 kwanzas/L ($0.33/L). Then, effective July 4, the government again increased diesel prices by 33% from 300 kwanzas/L to 400 kwanzas/L ($0.44/L). This sparked outrage in the capital city of Luanda resulting in 22 reported fatalities, 197 wounded, and 1,214 arrests.
The strong reaction of the Angolan public to the subsidy removal is consistent with consumers in other jurisdictions around the world reacting strongly to having to pay more for transport fuel or electricity. From taxi drivers in Cameroon, bus drivers in Egypt, to yellow vest protesters in France, and aggrieved passengers in Nigeria – there is little tolerance for expensive fuel.
Angola, a major oil producer, has since 2015 faced declining revenues arising from falling oil prices and reduced oil production. The price of oil (Brent) was at US$111/barrel (bbl) in 2011, but fell to $44/bbl in 2016. As of 2024, oil price had rebounded to $81/bbl – nearly double from eight years before.
Oil production has been in decline since 2015 – falling by 34% from its 2015 level to 1.18 million barrels per day (MMbpd) in 2024. To manage constrained revenues, the government cut spending on health, education, and social protection, but maintained fuel subsidies as a key form of social spending. Now, even this social buffer is gradually being removed. Angola’s decision to roll back fuel subsidies follows in the steps of other African countries that have risked the wrath of their populace in doing so – e.g., South Sudan, Cameroon, Ghana, Nigeria, Egypt, Senegal.
The reasons for removal are the same – subsidies cost the government a lot of money to maintain, crowd out investment in other areas, and incentivize cross-border smuggling. Angola’s fuel-subsidy expenditure of $3.8 billion in 2022, and $2.49 billion in 2023, represented 3.8% and 3.7%, respectively, of the country’s GDP, according to the International Monetary Fund (IMF).
In this article, we unravel the moving parts behind the announcements of fuel-subsidy withdrawal in Africa’s second-largest oil-producing country, and examine it against a wider canvass of Angola’s oil industry challenges.
The true cost of cheap fuel
Petroleum product price subsidy is calculated as the difference between the logistic market price and the fixed market price – also known as the “price gap” approach. The logistic market fluctuates in response to:
- international oil prices
- the exchange rate
- transport and storage costs
On the other hand, the fixed market price is set by the government.
According to Article 4 of the Presidential Decree No. 283/20, the logistic market price takes into account the following components:
- Base price, derived from international market benchmarks (Platts or other approved indices)
- Freight and insurance costs
- Port and customs charges
- Storage and distribution costs
- Taxes and fees
- Commercial margins for wholesale and retail
The subsidy is normally transferred from the central government to Sonangol, Angola’s national oil company. This practice has weighed on the financial position of the state-run company – enough for an executive of Sonangol to complain about the impact of the subsidy on planned privatization of the company “… it is more difficult to have investors who invest in a company that has these issues [of subsidy] to resolve.”
From 2019 to 2023, an increasing share of the wholesale market price of refined products has been subsidized. According to analysis conducted by the World Bank, in 2019, 10% of the market price of gasoline in Angola was subsidized. That percentage grew to 50% in 2023. In 2019, ~ 40% of the market price of diesel was subsidized, and by 2023 it had risen to 75%.
Figure 1 – Subsidy as a share of market wholesale price of transport fuels in Angola from January 2019 through December 2023 (Source: World Bank Group).
Subsidy on kerosene was 70% of the market price in 2019, and rose to ~ 90% in 2023 – suggesting that by 2023, Angolans were paying 10% of the market price for kerosene. Similarly, liquefied petroleum gas (LPG), used mostly for cooking in Angola, was subsidized at ~ 80% in 2023 – meaning Angolans only paid 20% of the market price for LPG. The high share of subsidy on the price of fuels – combined with the increasing consumption of refined petroleum products, a depreciating kwanza, and rising oil prices – resulted in $2.9 billion spent on fuel subsidies in 2024.
Fuel-subsidy spending has crowded out spending in other sectors. In 2014, Angola spent about 3.5% of its GDP on subsidizing fuels, which was about the same as spent on education, and 42% higher than was spent on health (Figure 2).
Figure 2: In 2014, Angola’s spending on fuel subsidies exceeded spending on health and rivalled that spent on education. (Source: IMF report, 2014)
This trend persists.
More recently, in 2022, $3.8 billion was spent on fuel subsidies, which far exceeded the health budget of $2.6 billion.
Slow withdrawal – the IMF blueprint baked into Angolan legislation
The IMF in 2014 provided a three-stage subsidy-reform process that promised to “… cut the fiscal cost of fuel-price subsidies while limiting the negative impact of the reform on the welfare of lower-income groups.” By the IMF’s reckoning, this strategy could eliminate fuel subsidies and result in fiscal savings of at least 2% of GDP.
Figure 3 is the illustrative action plan for the removal of subsidy in Angola as seen in a 2014 IMF report.
Figure 3 – Extract of the IMF’s proposed action plan for the elimination of fuel subsidies in Angola. (Source: IMF Report, 2014)
The plan called for the complete elimination of fuel subsidies in six years – by 2020 – by which time the net savings from eliminating the subsidy would be between 2% and 3.3% of GDP.
Summarily, the three-stage plan, which included a communication component and provided for social buffer, would proceed as follows:
Stage 1: Commence reduction of the fuel-price subsidy with the most fiscally costly fuel product (gasoline)
Stage 2: Let retail prices mirror international fuel-price increases, while compensation of the vulnerable continues.
Stage 3: Eliminate remaining price subsidies.
In June 2023, the Angolan government passed the Presidential Decree No. 134/23, which approved the general principles of the price-liberalization regime for petroleum products.
Article 5 (1) of the Presidential Decree No. 134/23 provides that:
“The liberalization of petroleum product prices shall occur in phases, starting with gasoline, followed by:
- a) Diesel (gasoil)
- b) Liquefied petroleum gas
- c) Illuminating oil (kerosene)
- d) Asphalt and other derivatives “
Further, the IMF recommendation for a public information strategy is reflected in Article 5(2) thus:
“The Government shall define and publish a national liberalization schedule, with timelines for the withdrawal of subsidies and the corresponding adjustment of retail prices.”
Additionally, Article 7(1) upholds the IMF recommendation to extend support to the vulnerable while gradual removal of the subsidies continues:
“The removal of fuel subsidies shall be accompanied by temporary compensatory mechanisms targeting:
- a) Low-income households (via social transfers such as the Kwenda program)
- b) Public transport operators (via fuel cards or discounted supply)
- c) Agricultural and artisanal fishing sectors (via targeted fuel support)
- d) Unemployed youth (via programs such as FUNEA, Angola’s national employment fund) “
Further, Presidential Decree No. 132/23 approves measures to mitigate the partial removal of gasoline subsidy and recognizes that the subsidy granted to taxi and moto-taxi operators “…will gradually decrease annually until it is fully phased out in 2025”, as per Article 3 paragraph B.
These snippets from Angolan laws passed in 2023 suggest that the principles and recommendations espoused by the IMF have been encoded into law. However, the government appears to have given itself a timeline of two years to fully eliminate the fuel subsidies, compared to the six years envisaged in IMF’s study.
(Part 1 of 2 … Kaase Gbakon, BIG Media Ltd., 2025)
