kwanzas, the estimated unit subsidy also increased, despite the adjustment in June, rising from 155 kwanzas in June to 307 kwanzas in July. Therefore, as in 2016, when the government removed gasoline and diesel subsidies, gasoline subsidies re-emerged after an increase in costs (this time due to currency depreciation).

We consider three scenarios for the next phases of the fuel subsidy reform. These scenarios should be treated as illustrative, as the authorities are still holding internal consultations to discuss the best approach and strengthen political ownership. In the first scenario, all fixed wholesale prices remain as of June 2024. In the second scenario, fixed wholesale prices for gasoline and diesel are adjusted to market levels by end-2025. In the third scenario, a more progressive one, fixed wholesale prices for gasoline and diesel are adjusted to market levels by end-2026. For the second and third scenarios, we assume that the price adjustments will occur twice a year in April and October, starting in October 2024. Additionally, the percentage change in price will remain the same for each fuel in each scenario.

Table 1. Next phases of the fuel subsidy reform in Angola

|||**F**<br>|**ixed whol**<br>|**esale prices**<br>|**in nomin**<br>|**al kwanzas**<br>|||**Percenta**<br>|**ge change**<br>||
|---|---|---|---|---|---|---|---|---|---|---|---|
|||_Scenar_|_io 1_|_Scenar_|_io 2_|_Scenar_|_io 3_|_Scena_|_rio 2_|_Scena_|_rio 3_|
|||Gasoline|Diesel|Gasoline|Diesel|Gasoline|Diesel|Gasoline|Diesel|Gasoline|Diesel|
|Phase 3|Oct-24|176|138|247|228|217|188|40%|66%|23%|36%|
|Phase 4|Apr-25|176|138|346|377|268|256|40%|66%|23%|36%|
|Phase 5|Oct-25|176|138|484|625|330|348|40%|66%|23%|36%|
|Phase 6|Apr-26|176|138|||406|474|||23%|36%|
|Phase 7|Oct-26|176|138|||500|646|||23%|36%|

Source: authors’ estimations. Note: these estimations are based on data available as of May 2024 and are subject to changes in volatile variables. For example, changes in the foreign exchange rate and global oil prices will undoubtedly have an impact on these estimations.

These subsidy removals would generate significant additional fiscal savings. If prices remain unchanged, total subsidy spending is projected to reach 3, 2.7 and 2.4 percent of GDP in 2024, 2025 and 2026, respectively. The decline in oil prices and the smooth nominal depreciation expected in the medium term would reduce subsidy spending as a share of GDP. In the second scenario, subsidy spending is expected to reach 3, 1.3 and 0.3 percent of GDP in 2024, 2025 and 2026, saving 0.05, 1.3 and 2.2 percent of GDP, respectively. In the third scenario, subsidy spending is expected to reach 3, 2 and 0.9 percent of GDP in 2024, 2025 and 2026, saving 0.03, 0.7 and 1.5 percent of GDP, respectively.

Table 2. Gasoline and diesel subsidy spending as a share of GDP by reform scenario

||**Sc**|**enario 1**||**Sc**|**enario 2**||**Sc**|**enario 3**||
|---|---|---|---|---|---|---|---|---|---|
||Gasoline|Diesel|Total|Gasoline|Diesel|Total|Gasoline|Diesel|Total|
|2024|0.7%|2.1%|3.0%|0.6%|2.0%|3.0%|0.7%|2.0%|3.0%|
|2025|0.6%|1.8%|2.7%|0.2%|0.8%|1.3%|0.4%|1.3%|2.0%|
|2026|0.6%|1.6%|2.4%|0.0%|0.0%|0.3%|0.1%|0.5%|0.9%|

Source: authors’ estimations For example, the fishing sector absorbs a relatively small share of overall subsidies but will be massively impacted by a removal of subsidy on diesel. If the impact is totally transferred to consumers, there could be a nutritional problem with long-term health consequences. Indeed, fish accounts for 47 percent of animal protein consumption in Angola (including cheese and eggs), 67 percent for the bottom decile, and 44 percent for the top decile. Ignoring these granularities means overlooking the 8