LUANDA, Oct 17 – Angola could spend as much as 3.8 trillion kwanzas ($4.16 billion) on fuel subsidies in 2026, nearly double its initial projection of less than 2 trillion kwanzas, as rising energy prices increase the cost of maintaining low domestic fuel prices.
Ottoniel dos Santos, Angola’s secretary of state for finance and the treasury, told Reuters on Friday that the higher bill was adding pressure to public finances. The increase comes as the ongoing war in the Middle East drives up energy prices, raising the cost of fuel subsidies in the oil-producing economy.
The mounting expenditure is intensifying pressure on the government to accelerate the gradual removal of subsidies, a process that began in 2023. However, authorities remain cautious about moving too quickly because of the potential economic and social consequences for households and businesses.
“We need to move not only with the subsidies removal, but also with the diversification of our economy,” dos Santos said in an interview on the sidelines of the annual meetings of the International Monetary Fund and World Bank in Bangkok.
“For now, it’s been taken as it is – slowly,” he added, referring to the pace of subsidy reductions. “But if there is any window that could be used… and if we expect the impact on those who are more vulnerable are less than we forecast, then it will be easy to implement.”
The comments highlight the challenge facing Angola as it seeks to contain fiscal costs while managing the effects of higher fuel prices on vulnerable households.
Higher oil prices complicate budget planning
Angola now expects oil prices to average around $90 per barrel by the end of 2026, significantly above the $61 reference price used in its budget for the year.
Although higher oil prices can increase revenue for an oil-producing government, they are also raising the cost of maintaining domestic fuel subsidies. The resulting fiscal impact depends on how additional petroleum revenues compare with subsidy expenditure and other budgetary pressures.
The government has yet to submit its 2027 budget, which is due at the end of October. Dos Santos said the oil price assumption would not differ significantly from the International Monetary Fund’s forecast of $71.50 per barrel.
Angola expects crude oil production to average 1.045 million barrels per day in 2027, matching its projected output for 2026.
The production outlook places additional importance on the relationship between oil revenues, subsidy costs and the government’s broader fiscal position. With subsidy spending potentially substantially above the initial budget projection, the government faces a more difficult balance between protecting consumers and controlling expenditure.
Financing needs and potential bond issuance
Angola’s $4 billion Eurobond issuance and other liability-management operations have covered the “majority” of the country’s funding needs for 2026, dos Santos said.
Any decision to issue additional bonds or seek further external financing will depend on the government’s assessment of funding requirements under the 2027 budget.
“This is something that we will have to see what will be the needs for 2027 and identify if there is an opportunity or not for us to come back to the market,” he told Reuters.
The comments suggest that Angola will assess its financing options after determining its spending and borrowing requirements for the coming year. The potential need for additional funding will depend on the final budget position and the government’s financing strategy.
Angola seeks greater foreign participation in domestic debt market
Alongside its external financing operations, Angola is working to attract more international investors to its domestic government bond market.
Dos Santos said the government was welcoming investors from all regions and stepping up efforts to explain how foreign investors can access the country’s capital market.
“Some investors think that the capital account is still closed, that it’ll be difficult to get out when they get in, but actually it’s not happening,” he said.
“We want to go everywhere, we want them to come as well… we want people to know that Angola is opening the domestic market to get opportunities from other investors, from other countries.”
Expanding foreign participation in domestic government debt could broaden the investor base available to the government. The effort also reflects Angola’s attempt to improve investor understanding of market access and the movement of capital into and out of the country.
The timing and scale of any additional external borrowing remain uncertain pending the 2027 budget.
For Angola, the combination of higher-than-expected subsidy costs, oil-price uncertainty and future financing requirements creates a complex fiscal outlook. The government must weigh the potential savings from further subsidy reductions against their social consequences, while managing public spending and maintaining access to domestic and international capital markets.
