Angola’s fuel subsidy bill could reach $4 billion this year, nearly double the amount initially allocated in the national budget, as rising international oil prices make it increasingly costly to maintain low domestic fuel prices and heap pressure on public finances.

According to information published by Reuters, the Angolan government may spend up to $4 billion on fuel subsidies in 2026. Ottoniel dos Santos, Secretary of State for Finance and Treasury, stated that rising energy prices are compounding the burden on the state, making it more expensive to hold fuel prices at subdued levels for consumers.

Angola’s 2026 State Budget was drawn up on the basis of a reference oil price of $61 per barrel. However, the average price has hovered around $87 per barrel over the course of the year, according to Reuters data, while the government projects it could reach $90 per barrel by the end of 2026.

The rise in oil prices allows Angola to earn greater revenues from exports, but simultaneously drives up the cost of domestic fuel subsidies. The net impact on public finances will ultimately depend on production volumes, quantities exported, and the pace at which subsidy payments are disbursed.

According to an analysis by Further Africa, the increase in subsidy costs represents a fiscal risk greater than initially anticipated and could constrain decisions on public debt and medium-term expenditure. This pressure on public accounts comes at a time when inflation in Angola has been easing in recent months.

Angola began gradually reducing fuel subsidies in 2023. Since then, authorities have proceeded cautiously to limit the impact of price increases on households and businesses. At the annual meetings of the International Monetary Fund (IMF) and World Bank held in Bangkok, Thailand, Ottoniel dos Santos argued that reform must advance in parallel with economic diversification.

“We need to move forward not only with the removal of subsidies, but also with the diversification of our economy,” said Ottoniel dos Santos. A faster reduction in subsidies would help cut the state’s recurrent expenditure, but could also raise transport and operating costs for businesses, against a backdrop of shifting diesel costs across African markets.

Meanwhile, the Angolan government indicated that a $4 billion eurobond issuance, combined with liability management operations, has covered the bulk of the country’s financing needs for 2026. Whether additional borrowing will be required will depend on the final level of expenditure and the financing requirements projected for 2027.

Against this backdrop, investors will be watching Angola’s 2027 State Budget proposal closely, particularly its assumptions for oil prices and fuel subsidy costs. These elements will provide a clearer picture of how far the Angolan government is prepared to adjust public spending in order to contain pressure on the public accounts.