Another African country opts to remove fuel subsidies following IMF’s advise

Angola has removed diesel subsidies to free up funds for critical sectors
The country's economy is beginning to experience some recovery after the removal of fuel subsidies
The International Monetary Fund advised the subsidy removal to free up to $3 billion for health and education budgets

While the raging debate surrounding the effects of removing fuel subsidies continues, there is an underlying understanding that removing subsidies is generally a good idea.

Economic ripple effects in some economies may prove otherwise, as is the case with Nigeria, where subsidy removal has driven hyperinflation, under the pretext that the benefits would be felt later on.

Nigeria's fuel subsidy bill has spiked and as February elections approach, questions are being asked about the government's management of oil sales and earnings AFP

A recent report by Bloomberg shows that Angola is the latest country to walk down this path, removing of diesel subsidies, subsequently driving diesel prices up by 50%.

This would mark the second time the country is cutting down subsidies, as the cost of living in the Southern African country continues to bite down on residents.

As of 1 a.m. on Monday, the country's diesel price was increased to 300 kwanzas ($0.33) per liter, up from 200 kwanzas according to a statement from the petroleum derivatives regulator.

Similarly, in April 2024, the country had increased diesel prices from 140 Kwanza to 200 kwanza.

The International Monetary Fund which advised the move three weeks ago, argued that it could free up to $3 billion, the same amount allocated to the country’s health and education budgets.

Eliminating subsidies may allow the government to boost spending in other sectors, but it is also expected to drive up transport costs in a country where the World Bank reports that over half of the 37 million population survives on less than $2 a day, as per the report by Bloomberg.

A comparable move to remove gasoline subsidies in 2023 sparked violent protests in Huambo, a city in central Angola, resulting in deadly clashes between taxi drivers and the police that left five people dead.

“We’re not happy with the increase in fuel prices,” said Sabino Vieira da Silva, president of Angola’s truck drivers association, which has about 3,500 members.

“We’ve warned the government about the potential consequences of the fuel price increase,” he said, adding that his members will meet April 11 to decide an official position on the matter.