- Of the 5.2 percent increase in prices, 2.9 percentage points are due to an 11.1 percent indirect increase in the costs of inputs and 2.3 percentage points to the direct increase of 122.4 percent in oil prices.

- Of the 124 sectors, 16 sectors would see a 16 percent increase in their sales prices driven by a 53.2 percent increase in the cost of inputs. The highest increases are in fishing and transportation. The fishing sector absorbs 8.4 percent of oil demand, but oil is 57 percent of the sector’s input, hence the significant rise in prices in this sector. The road transportation sector absorbs 17.1 percent of oil demand and oil is 41.6 percent of the sector’s inputs.

- Once these 16 sectors and the direct increase in oil prices are accounted for, the increases experienced by the rest of the economy are 1.8 percent and 7 percent, for sales prices and input costs, respectively.

- The 16 sectors represent 8.7 percent of GDP, 7.9 percent of uses, and absorb 9 percent of all inputs. However, oil products amount to 34.8 percent of their inputs, and 11 percent of their sales against 2.4 percent and 0.7 percent for other sectors.

- Of the oil products sold domestically, 89.7 percent are used as inputs, while the rest is used for household final consumption. Of the 89.7 percent, 53.1 percent are absorbed by the abovementioned 16 sectors, hence representing 59.3 percent of all oil inputs.

sectors, and government intervention should be designed accordingly. In the fishing sector, a transfer of the price shock to consumers can have heavy nutritional and public health consequences given the reliance of the population, especially the poor, on fish as a key source of animal protein. Indeed, fish represents 47 percent of animal protein intake in Angola, 67 percent for the lower decile and 44 percent for the higher decile. The fishing sector has few forward linkages to the economy, only 2 percent of its supply is used as input and for 10 sectors out of 124. Hence, while cash transfers would help mitigate some of the impact, direct producer subsidy might be more efficient, provided it is well designed, given the strong and clear direct impact and the limited number of employers and workers in the sector (1.2 percent of the working force). In the transportation sector, the situation is different given the strong forward links the sector has with the rest of the economy, with 24 percent of sector’s supply used as inputs in 121 sectors out of 124. Here, given the importance of indirect channels, cash transfers are crucial to help households alleviate the impact of subsidy removal. Whether the cash transfer will be universal or targeted depends on the quality of censuses, surveys, and social registries. Still, simulations show that with 30 percent of the savings generated from subsidy removal (around 1 to 1.5 percent of GDP), the government could fully compensate for the increase in fishing and road transportation costs. This can be considered the upper boundary of the compensation package, regardless of the form and channels of this compensation.

# 6- Summary and policy implications

In response to the sharp rise in world oil prices in recent decades, many governments have introduced fuel subsidies to protect poor households. These subsidies are generally inefficient and generate significant socio-economic costs. In absolute terms, fuel subsidies benefit the rich more than the poor. In addition, they burden public finances, encourage over-consumption of polluting energies, and distort the allocation of production factors towards sectors benefiting from cheap fuel.

given the economic, social, and political implications it may trigger. Measures aimed at reducing or 10