October 20, 2026/Cordros Report
Angola’s gradual fuel subsidy reform has left the budget exposed to higher oil prices. Although gasoline and diesel price increases since 2023 have reduced the subsidy burden, public opposition and delays in extending cash transfers to vulnerable urban households have made further increases more difficult. Fuel subsidy payments reached AOA1.73 trillion in H1-26, exceeding the full year allocation for all subsidies by about 40.0%. Together with broader spending pressures, this pushed the H1 fiscal deficit to AOA3.94 trillion, above the AOA3.80 trillion budgeted for the whole year, despite stronger oil receipts. We project a full year deficit of AOA7.78 trillion (5.6% of GDP), as higher oil revenue only partly offsets expenditure overruns. The resulting increase in borrowing needs is likely to slow debt reduction, although we expect the debt ratio to come in at 52.6% by year end, remaining below Angola’s 60.0% of GDP legal ceiling.
Social & Political Costs Have Slowed Down Subsidy Reforms in Angola
Angola’s fuel subsidy reform gained urgency in 2022, as higher global oil prices widened the gap between regulated pump prices and the cost of supplying fuel. The subsidy bill reached an estimated USD3.10 billion that year, straining public finances, while low domestic prices encouraged fuel smuggling. Against this backdrop, the government began implementing the fuel price reform it had set out in its 2018–21 IMF programme commitments. In June 2023, gasoline prices rose by 87.5% to AOA300.00/litre (Previous: AOA160.00/litre). Diesel prices rose by 48.1% in the first adjustment in April 2024, from AOA135.00 to AOA200.00/litre. Two further increases took the price to AOA400.00/litre in July 2025, before a more modest 5.0% increase brought it to AOA420.00/litre in June 2026. Meanwhile, gasoline prices have remained at AOA300.00/litre since June 2023.
The adjustments helped reduce the fiscal cost of subsidies. According to the IMF, subsidy expenditure fell to 1.6% of GDP in 2025 (2022: 3.8%). Lower international fuel prices and reduced fuel consumption also contributed to the decline, though kwanza depreciation offset part of the savings. However, implementing further pump price increases has proved difficult. Higher transport costs and public opposition followed the July 2025 diesel adjustment, which prompted strikes and unrest. Cash transfers intended to support vulnerable households in both rural and urban areas have so far reached predominantly rural families, leaving urban coverage limited. As a result, domestic prices remain below supply costs, and the budget remains exposed to renewed increases in oil prices.
Subsidy Overruns Have Added to Borrowing Needs in H1-26
Currently, higher oil prices have renewed pressure on Angola’s subsidy bill as domestic pump prices have barely changed. According to Angola’s Ministry of Finance, fuel subsidy payments reached AOA1.73 trillion as of June, equivalent to 2.4% of H1-26 nominal GDP (H1-25: 1.7%). This is about 40.0% above the AOA1.24 trillion allocated for all subsidies in the full year budget. The subsidy overrun was compounded by goods and services spending of AOA3.93 trillion, which had nearly exhausted its full year allocation, and interest payments of AOA2.69 trillion, equivalent to 62.3% of its annual budget. Together, these pressures brought total expenditure to AOA14.39 trillion, or 65.5% of its annual allocation. While higher oil prices supported oil revenue, non-oil revenue reached only 37.7% of its annual target, with limited contributions from dividends and other non-tax receipts. This led to H1-26 fiscal deficit of AOA3.94 trillion, exceeding the AOA3.80 trillion budgeted for the whole year.
The wider deficit increased the government’s financing needs. Net incurrence of liabilities reached AOA4.10 trillion in H1-26, equivalent to 99.7% of the AOA4.11 trillion planned for the full year, comprising AOA3.47 trillion from external creditors and AOA0.63 trillion from domestic creditors.
Spending Pressures Point to a Wider Full Year Deficit
The government has indicated that it does not envisage another fuel price adjustment soon. This is primarily because its cash transfer program (Kwenda) is yet to extend to vulnerable households in urban areas, as a removal or marked fuel price increase may spark renewed public opposition and protests. We therefore expect pump prices to remain broadly unchanged through year end, leaving the subsidy bill exposed to elevated oil prices.
Therefore, we estimate total expenditure to reach AOA27.92 trillion by year end, surpassing the government’s target (AOA21.97 trillion). Most of the pressure is expected to stem from higher than budgeted subsidy payments and increased oil cargo purchases targeted at oil backed debt repayments. Meanwhile, oil revenue is estimated to surpass budget primarily due to higher oil prices (2026E: USD95.00/barrel | Budget: USD61.00/barrel). However, we expect weaker non-oil revenue to partly offset these gains, particularly as non-tax receipts depend on dividend distributions from a small number of state-owned enterprises. These inflows are sensitive to company profitability and dividend payout decisions. Overall, we project Angola’s fiscal deficit to reach AOA7.78 trillion (or 5.6% of GDP) in 2026, exceeding the AOA3.80 trillion (or 2.7% of GDP) full year target and AOA5.21 trillion (or 4.1% of GDP) in 2025, as spending pressures outweigh the benefit of stronger oil receipts.
What Does This Mean for Angola’s Debt Sustainability?
Angola’s public debt rose to about 120.0% of GDP in 2020 from 59.6% in 2017, as falling oil prices, kwanza depreciation and economic contraction increased the debt burden. The ratio subsequently declined to 51.3% in 2025, supported by primary fiscal surpluses, stronger oil receipts, nominal GDP growth and external debt repayments. By June 2026, government debt stood at AOA65.80 trillion, or 51.2% of GDP.
We assess that Angola’s lower debt burden and stronger oil receipts give the government some room to absorb the current fiscal pressure. Nevertheless, our projected fiscal deficit of AOA7.78 trillion (5.60% of GDP) is expected to increase financing needs and slow further progress in reducing debt. Assuming the exchange rate remains broadly stable at AOA912.10/USD through year end, we project the nominal debt stock to reach AOA72.72 trillion, or 52.6% of GDP. This remains below Angola’s 60.0% of GDP legal debt ceiling, while higher oil export earnings and the improvement in the external position provide support for near term debt payments. Oil accounts for about 95.0% of exports, and higher export earnings helped move the current account into a surplus of 2.0% of GDP in H1-26 (H2-25: deficit of 0.5%). We therefore assess that the subsidy overrun alone is unlikely to threaten debt sustainability in 2026. However, sustained spending pressures or a reversal in oil prices could raise borrowing needs further and leave the debt ratio more exposed to kwanza depreciation.