Angola: 25 percent fuel price increase

Off the back of a disappointing oil output this year, Angola, Africa's second largest oil producer, has increased fuel prices by an average of 25 percent. The price increase will help reduce subsidies and boost government spending, the finance ministry has said. The ministry said in a statement on its website this week that the price of petrol would rise to $0.76, while diesel would go up by the same margin to $0.51. "When these fixed prices are adjusted, the government creates fiscal space by reducing subsidies, allowing the opportunity for other spending on social and economic sectors," it said. Fuel increases are the latest indication that Angola's budget is feeling the strain from lower oil output this year, said Jacques Nel, an economist at NKC Independent Economists. "While an increase in fuel prices will have inflationary effects, the overall impact of a more favourable fiscal position with spending directed towards projects with medium term gains should benefit the economy," Nel told said. Cut reliance on oil Angola needs to repair infrastructure and expand other sectors of the economy to cut its reliance on oil, which accounts for 40% of gross domestic product and over 95% of export revenue, economists say. In March, the International Monetary Fund urged President Jose Eduardo dos Santos' government to cut spending on fuel subsidies, which add up to 4.8% of GDP. The IMF said the southern African country could achieve social benefits by replacing fuel subsidies with targeted cash transfers to compensate the most vulnerable households for any increase in fuel prices. Angola's economic growth is likely to slow to 3.9% in 2014 from an estimated 6.8% last year, with strong agricultural production offsetting a drop in oil output, the IMF said earlier this month. *Source theafricareport]]>