The yield on Angola’s 2028 eurobonds fell 16 basis points to
11.2 percent , the lowest in nearly two months, after the announcement.
Securities due in 2032 also strengthened, with the yield down 22 basis points
to 11.6 percent, the report said.
After the Cabinet meeting on Thursday in the capital ,
Luanda. Manuel Nunes Junior,Economic Coordination Minister said,the subsidy
reduction will take effect from Friday, meaning the gasoline price will rise to
300 kwanza ($0.51) per litre from 160 kwanza.
“That’s still less than the open market price of 533 kwanza,
with the difference being met by the government. Subsidies for other fuels,
including gasoil, a type of diesel, will remain in place for now.” Nunes said.
“Africa’s second-biggest crude oil producer imports most of
its fuel due to a lack of refining capacity and spent 1.9 trillion kwanza ($3.5
billion) last year on the support, according to the government.
Higher transport costs would make life harder for commuters
in a country where the World Bank estimates more than half the population of 33
million live on less than $2 a day.”
“Important Savsaid.
“To mitigate that risk, the government will retain gasoline
subsidies for taxi drivers, farmers and fishermen.
The removal of these subsidies will result in important
savings, not only for public finances but also for the survival of our
state-owned oil company Sonangol,” he said.
“The money the government saves will be used to fund
education, health projects, housing and employment,” Nunes said.
Fitch Ratings said in a briefing note in January that the
planned gradual removal of subsidies will “increase domestic pump prices and weigh
on household purchasing power, likely triggering protests.” It identified that
as the main political risk to Angola this year.
The International Monetary Fund has urged Angola to end the
subsidies to create room for more spending on reducing poverty
The southwest African nation’s central bank plans to revise
its inflation target and the outlook for interest rates now that the Finance
Ministry has finalised proposals to remove the subsidies. It currently
forecasts inflation will end the year at between 9 percent and 11 percent .
Bloomberg said
In addition to the possible impact of higher fuel prices on
inflation, a decline in exports and currency weakness are contributing to
uncertainty about the outlook for interest rates, Banco Nacional de Angola Governor
Jose de Lima Massano said in a May 23 interview.
The kwanza has depreciated 13.5 percent against the US
currency this year to 589 kwanza per dollar.
Angola has the fourth-lowest gasoline prices in the world
after Libya, Iran and Venezuela, according to data compiled by
Globalpetrolprices.com. A litre of the fuel in Angola costs less than a bottle
of water and is way lower than the global average of $1.28.
While the government has been trying to eliminate fuel
subsidies for years, they still account for about 10 percent of the national
budget, according to state asset-management institute IGAPE.
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