AS Angola grapples with mounting fiscal challenges and structural imbalances, its appeal to Western investors has waned sharply.

The Angolan government has announced a 50% increase in the price of diesel fuel, the second significant increase over the last year in a country where the population is already suffering from the cost of living.

Once hailed as a post-war success story with rapid gross domestic product (GDP) growth, the southern African nation now faces a confluence of economic pressures — from dwindling International Monetary Fund (IMF) support and contentious subsidy reforms to a hostile investment climate exacerbated by corruption and oil dependency.

How do these factors undermine the confidence of foreign investors, leaving Angola increasingly isolated in a competitive global market?

In 2024, the IMF intensified its calls for Angola to accelerate fuel subsidy reforms as part of fiscal consolidation efforts. By late 2024, Angola’s finance ministry confirmed that it was no longer negotiating a new IMF financial programme, despite earlier discussions about potential support.

This marked a critical shift: Without IMF backing, Angola’s access to liquidity and debt management tools weakened, further straining its $63.3 billion (R1.2 trillion) public debt burden. The Fund’s withdrawal of direct funding support — coupled with its insistence on subsidy cuts — left Angola navigating austerity measures without a safety net, deterring risk-averse Western capital.

The IMF’s push to eliminate fuel subsidies has been a cornerstone of its engagement with Angola. In 2023, the government raised petrol prices by 87.5% overnight, triggering mass protests and social unrest.

Despite plans to phase out all subsidies by 2025, the reforms have strained public finances and exacerbated inflation, which averaged 28% in 2024. While the IMF argues that subsidy removal would free funds for development, the abrupt hikes have deepened poverty and political instability.

According to the World Bank, more than half of the 37 million citizens survive on less than $2 a day, and rising fuel prices will inevitably lead to higher costs of public transport and basic necessities. For investors, such instability signals systemic risk, especially as citizen unrest disrupts economic activity and exacerbates governance problems.

Western investment inflows into Angola have stagnated in recent years, despite growth in sectors like oil and infrastructure. The US Department of State’s 2024 report highlighted enduring barriers: Corruption (ranked 121/180 in Transparency International’s index), a sluggish judicial system, and restrictive local content laws requiring majority Angolan ownership in strategic sectors.

Notably, Angola’s decision to leave Opec — the oil producers cartel — in 2023 to prioritise oil production may backfire as global prices start falling, squeezing revenue and foreign reserves. Angola’s economy remains tethered to oil, which accounts for 90% of exports and 40% of GDP.

Efforts to diversify into agriculture and mining via projects like the Lobito Corridor have been hampered by bureaucratic inefficiencies and underinvestment. The IMF has repeatedly warned that oil price volatility and debt servicing costs (projected at $2.3bn in 2024) could derail growth.

Angola’s economic trajectory underscores a harsh reality: Without IMF backing, structural reforms, and credible governance, Western investors will continue to shun its markets. The subsidy cuts, though fiscally necessary, have inflamed social tensions, while oil dependency and corruption perpetuate cyclical instability.

The cancellation of IMF grants to Angola only confirms the current Western strategy of phasing out investments in secondary countries against the background of more important projects.

Economists hope that Angola’s growing ties with other international actors, in particular China or its neighbours within the Southern African Development Community (Sadc), will open up alternative routes for trade and investment, although results of this expanding partnership will be noticeable much later.

* Dr Eric Hamm is a professor of political science and strategic researcher. The views expressed here are his own.

** The views expressed here do not reflect those of the Sunday Independent, Independent Media, or IOL.

fuel subsidy reforms

Why Western investors are shunning Angola amid rising fuel costs