The government of the Republic of Angola recently announced the end of the gasoline subsidy in the country. This measure entered into force on Monday, June 5, 2023 and aims to liberalize the price of fuel, which is currently one of the lowest in the world. Fuel subsidy costs in 2022 were in the order of $3.8 billion.
The end of gasoline subsidies in Angola has been met with mixed reactions from neighboring countries. While some are happy that the smugglers of petroleum products see their market restricted, others fear a rise in prices for their citizens. The main beneficiary of this new measure is the DRC, whose fuel sales are expected to increase due to the consequent drop in sales by smugglers.
The current situation in Angola bears witness to the importance of taking into account economic and financial realities for the implementation of public policies. Indeed, the country suffered the brunt of the oil shock of 2014-2015, which considerably increased the public debt and generated a sharp depreciation of its local currency. By entering into a program with the IMF, Angola was forced to liberalize the price of gasoline, then to end the subsidy.
Although this new measure may raise fears of increased costs for citizens, the Angolan government has implemented a mitigation measure for a category of the population, including taxi drivers, farmers and fishermen. But the real benefits of this economic measure may be visible in the long run as the proceeds could be used for social policies such as social security and housing policy.
In sum, the end of gasoline subsidies in Angola is a strong signal from the government to promote a more responsible and sustainable economy, and this could have repercussions that go beyond Angola’s borders.