LUANDA, June 30, 2023 — As Angola embarks on ambitious reforms to promote economic diversification, strengthen social inclusion, and build climate resilience, the World Bank has committed to helping mitigate the social impacts of these reforms through the First Green, Resilient, Inclusive Growth and Diversification Development Policy Loan (DPL) for Angola.
Although Angola is one of Sub-Saharan Africa’s largest oil producers, the country´s significant dependence on the oil sector exposes it to external shocks, stunts the non-oil economy, and creates few jobs. Approximately one-third of Angola’s 34 million people live on less than $2.15 per day (2017 purchasing power parity), accounting for 11.7 million people in 2023. At the same time,
Angola’s artificially low fossil fuel prices cost the government about $3.1 billion in subsidies in 2022, crowding out much-needed investments in human and physical capital.
Among other reforms, gradually removing fossil fuel subsidies while mitigating impacts on the most vulnerable households is part of the government’s plan to put the economy on a more diverse, green, resilient, and inclusive footing. The $500 million DPL supports this agenda and provides financing for Angola to help mitigate social impacts just when an increase in gasolines prices by about 87% is causing hardship and a spike in inflation.
“This financing will support government efforts to reduce the social costs associated with the fuel subsidy removal,” said Juan Carlos Alvarez, World Bank Country Manager for Angola. “The reform will eventually lead to savings that can be invested in health, education and social protection programs that improve access to opportunities for Angola’s people.”
The DPL financing supports Angola’s agenda in three areas:
The first pillar includes measures to reduce economic distortions and strengthen Angola’s fiscal and financial sector resilience by correcting fuel prices and improving petroleum sector regulations, strengthening fiscal and financial sector resilience, and improving the management and accountability of State-Owned Enterprises.
The second pillar seeks to strengthen social inclusion by mitigating subsidy reform impacts and improving equity and access in urban public transport through targeted support. Under a social protection program known as Kwenda, cash transfers helped alleviate poverty and cushion economic shocks for over 600 000 households in rural Angola as of May 2023. Policies supported by the DPL are expected to increase the duration and amount of this support and expand the Kwenda program to at least 1.6 million households in 2025, as a first step to establish an adaptive safety net system that allows vulnerable households to cope with climate and economic shocks.
The third pillar focuses on improving markets and infrastructure to build climate resilience by boosting investments in electricity access and transmission; improving regulation of water resources and utilities; deepening insurance markets to support climate resilience and growth in agriculture; and reducing greenhouse gas (GHG) emissions from oil and gas operations.