potential for a social crisis originating in a specific social and economic category (fishermen), and a public health crisis that can hardly be alleviated by cash transfers.

Using the 2015 Input-Output (IO)<sup>3</sup> table for Angola, we simulated the impact of the fuel subsidy removal on the cost structure, and in which sectors the impact will be concentrated. We simulate an increase in oil input prices using the IO table (see Annex 1 for the Methodology) with 124 sectors and simulate the past increases from June 2023 and April 2024 and the full impact of the subsidy removal starting from the first price increase in June 2023. We further provide an estimation of the size of the needed mitigation.

The June 2023 increase in gasoline prices by 87.5 percent generated a price increase of 0.6 percent in total, including 2.4 percent for fishing and 2.0 percent for transportation (Annex 2). Fully compensating for the increase in fishing would have absorbed 10.9 percent of the savings the government generates, and fully compensating for road transportation would have absorbed 16.5 percent. Hence, with 27.4 percent of the savings, the government could have fully compensated for the increase in fishing and road transportation costs.

April 2024 increase in diesel by 48 percent generates a price increase of 1.0 percent in total, including 3.5 percent for fishing and 3.9 percent for transportation (Annex 3). Fully compensating for the increase in fishing would absorb 10.3 percent of the savings the government generates, and fully compensating for road transportation would absorb 20.8 percent. Hence, with 31.1 percent of the savings, the government can fully compensate for the increase in fishing and road transportation costs.

The combined increases of June 2023 and April 2024 generate a price increase of 1.6 percent in total, including 5.9 percent for both fishing and transportation (Annex 4). Fully compensating for the increase in fishing would absorb 10.5 percent of the savings the government generates, and fully compensating for road transportation would absorb 19.1 percent. Hence, with 29.6 percent of the savings, the government could have fully compensated for the increase in fishing and road transportation costs.

In line with the above, and if the government intended to pass on the increases on consumers, the increase in taxi fares should have been around 5.9 percent. Yet, the taxi drivers, after an agreement with the government, have increased the fare by 33 percent, which may suggest the ability to accommodate the impact of potential future additional fuel price hikes. Yet, based on the fuel price hikes scenarios discussed in this paper, the 33 percent increase would still overcompensate taxi drivers at the expense of consumers.

The full removal of subsidies, including the 87.5 percent increase in gasoline, and the 48 percent increase in diesel, raises prices by 5.2 percent (Annex 5). Prices in fishing increased by 19.4-23.4 percent and in transportation by 20 percent. Fully compensating for the increase in fishing and transportation absorbs respectively 10.4 and 19.7 of savings, hence 30.2 percent in total.

> 3 The use of the IO table from 2015 implied a tradeoff between relevance of the analysis and data accuracy. Without the IO, it is impossible to estimate some of the most relevant impacts, such as the increase in costs across sectors, and the change in the cost structure in the economy. However, the 2015 IO is the last available for Angola, and given the dynamic nature of economies, particularly in an oil-dependent country like Angola, the availability of recent data is important for the accuracy of the estimates. Usually, IOs are updated every 5 years, but unfortunately this is not the case in Angola, despite it being a middle-income country. Hence, we hope the relevance of the impacts we are estimating would motivate the authorities to update the IO more frequently for more accurate understanding of the economy and of the implications of reforms.

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