Angola Will Only Scrap Subsidies When Cash Transfers Are Ready

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Angola and the International Monetary Fund have agreed that the oil producer won’t scrap fuel subsidies before a new cash-transfer program is in place to protect vulnerable households from the impact of higher prices.

The government is working with the IMF and World Bank to make sure the timing of the removal is aligned with the start of the cash transfers that are being planned to buffer poor households, Finance Minister Vera Daves de Sousa said Friday in an interview at the annual meetings of two two lenders in Washington D.C.

Subsidies have over the years added to the strain on the budget of Africa’s second-largest oil producer. While grants for power and water have been cut, the government decided in March to grant new fuel subsidies for agriculture and fisheries, leading to criticism from the IMF. The grants will cost a projected 172 billion kwanza ($386 million) this year.

Angola and the IMF first agreed in December to put in place a cash transfer system before ending oil subsidies and grants when former Managing Director Christine Lagarde visited the country. The goal is to reach 1 million families by mid-2020, by which time an automatic fuel-price-adjustment mechanism should be in place, the IMF said in June.

In a meeting this week, the director of the African Department Abebe Aemro Selassie said Angola should not move on the subsidies without making sure there is buffer, Daves de Sousa said. The government is expecting $300 million in support from the World Bank to help fund the cash transfers, she said.

To contact the reporter on this story: Rene Vollgraaff in Johannesburg at rvollgraaff@bloomberg.net

To contact the editors responsible for this story: Benjamin Harvey at bharvey11@bloomberg.net, Robert Jameson

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