Angolan finance minister sees signs of faster inflation after fuel subsidy cuts

2023-06-22 20:24:01

Angola is seeing signs of increasing price pressures following the government’s decision to cut gasoline subsidies earlier this month, which nearly doubled pump prices in a country that had one of the cheapest fuels in the world.

“We are seeing the first signs of this impact,” Finance Minister Vera Daves de Sousa said in an interview on Bloomberg Television in Paris with Francine Lacqua. Monetary policy and measures to avoid “some speculation” on prices should put inflation back on a “downward path”, she said.

The annual inflation rate in Angola, Africa’s second-biggest oil producer, rose to 10.62% in May, interrupting 15 consecutive monthly declines in consumer prices. The central bank, whose governor was replaced this month, said it plans to revise the inflation target of between 9% and 11% for the end of 2023 after the removal of fuel subsidies.

The cancellation of the incentives came at the same time that Nigeria, Africa’s biggest oil producer, withdrew its own subsidy, causing prices at the pump to triple. Angola seeks to contain expenses and gain fiscal space to invest in sectors such as education, health and local businesses to improve the lives of ordinary citizens, said Daves de Sousa.

Asked if the government feared more social unrest after violent protests earlier this month in several cities in Angola, which resulted in the deaths of people, the minister said: “we are working hard on mitigation measures”.

“We have increased the monthly amount of money for poor families, especially in rural areas, and we have earmarked more money for our cash gift program,” she said. “We are also establishing an employment fund.”

Daves de Sousa, who became the country’s first female finance minister in 2019, reiterated her government’s economic growth forecast of 3% for 2023. Although Angola’s oil production is declining, it remains “very positive” in relation to the non-oil sector.

“We are still confident of a 3% growth this year, but we will see in the coming months how oil production will behave,” said Daves de Sousa.

For now, Angola does not plan to sell Eurobonds and will continue to monitor market conditions for a possible sale.

“The interest rate the market will ask us to pay is too high to handle,” she said. “We will only intervene when we understand that by doing so we will not put ourselves in a risky position in terms of debt service.”