Angola could spend as much as 3.8 trillion kwanzas ($4.16 billion) on fuel subsidies in 2026, almost twice its initial budget projection, highlighting the challenge of protecting consumers from higher energy costs while managing public expenditure and reducing dependence on oil revenues.
Ottoniel dos Santos, Angola’s Secretary of State for Finance and the Treasury, disclosed the revised estimate in an interview with Reuters on Friday, 16 October, on the sidelines of the annual meetings of the International Monetary Fund (IMF) and World Bank in Bangkok. The government had initially budgeted less than 2 trillion kwanzas for fuel subsidies, according to the official.
The increase reflects the rising cost of maintaining relatively low domestic fuel prices as international energy markets respond to the ongoing conflict in the Middle East. Although higher oil prices can generate additional revenue for petroleum-exporting countries, they can also increase the fiscal cost of protecting domestic consumers from international price movements.
For Angola, a major oil producer whose public finances remain closely linked to the petroleum sector, this creates a complicated policy trade-off. Higher export earnings do not automatically translate into an improved fiscal position when expenditure on subsidies and other commitments also rises.
The government began gradually reducing fuel subsidies in 2023 but has proceeded cautiously because of concerns about the effects of higher transport and energy costs on households and businesses.
“We need to move not only with the subsidies removal, but also with the diversification of our economy,” dos Santos told Reuters, emphasising the relationship between subsidy reform and the need to develop economic activity beyond the oil sector.
The challenge is not simply how quickly the government can reduce its subsidy bill, but how it can manage the transition without placing a disproportionate burden on lower-income households and businesses that depend on affordable transport and energy.
Angola’s experience also illustrates a wider policy dilemma for African economies exposed to volatile international commodity prices: how to balance fiscal sustainability with the immediate economic needs of their populations.
The IMF’s 2026 assessment of Angola’s economy noted that the country’s fuel subsidy reforms had not fully aligned domestic prices with international market levels. Diesel prices had increased substantially since the reforms began, while remaining below international benchmarks. The programme was accompanied by measures intended to mitigate the effects on vulnerable groups, including expanded access to cash transfers and targeted transport support.
Angola’s revised subsidy projection comes as the government reassesses its assumptions for the next budget. Dos Santos said the country now expected oil prices to average approximately $90 per barrel by the end of 2026, compared with the $61 reference price underpinning its 2026 budget.
For 2027, the government expects its oil price assumption to remain broadly consistent with the IMF’s forecast of $71.50 per barrel. It projects crude oil production of 1.045 million barrels per day, approximately the same level anticipated for 2026.
These estimates will be important in determining the government’s revenue outlook and financing requirements. Angola’s 2026 budget was prepared around an oil price assumption of $61 per barrel and production of approximately 1.05 million barrels per day, according to the government.
The government is also considering its borrowing requirements for the coming year. Dos Santos said Angola’s $4 billion Eurobond issuance and other liability-management operations had covered most of its financing needs for 2026.
Any further borrowing will depend on the expenditure and revenue projections contained in the 2027 budget, which was expected to be submitted by the end of October.
At the same time, Luanda is seeking to attract more international investors to its domestic government bond market. Dos Santos said the authorities were working to improve awareness of investment opportunities and address concerns among foreign investors about entering and exiting the market.
Greater international participation could broaden the government’s sources of domestic financing, although investor appetite will depend on factors including market access, currency risks, returns and confidence in the country’s economic management.
The broader issue extends beyond the immediate cost of fuel subsidies. Angola must determine how to convert its petroleum resources into more diversified economic activity, while ensuring that fiscal reforms account for the circumstances of households and businesses.
Reducing subsidies could release public resources for other priorities, but the economic consequences will depend on the pace of implementation, the availability of targeted support and the government’s capacity to expand alternative sources of employment and income.
For an economy seeking to reduce its exposure to oil-price volatility, the challenge is therefore twofold: managing the immediate fiscal cost of maintaining affordable fuel while developing a more resilient economic base that can sustain public services, productive investment and household welfare over the longer term.
