AfDB warns of risk of instability in African countries after elimination of fuel subsidies

BAD alerta para risco de instabilidade nos países africanos após eliminação dos subsídios aos combustíveis

The African Development Bank (AfDB) has issued a stark warning about the potential instability hanging over several African countries, including Nigeria, Kenya, Ethiopia and Angola, as a result of the removal of fuel subsidies and the rising cost of living.

"Internal conflicts and violence can also result from rising fuel and other commodity prices due to the weakening of national currencies and reforms," says the report "Africa's Macroeconomic Performance and Outlook".

In addition, the removal of fuel subsidies and other emergency measures in some countries could exacerbate inflationary pressures.

Nigerian President Bola Tinubu eliminated fuel subsidies, and the measure was supported by the International Monetary Fund. The removal of subsidies led to an increase in commodity prices, which caused public dissatisfaction and led to protests in several Nigerian cities.

The elimination of fuel subsidies and the weakness of the local currency led inflation to reach an almost three-decade high of 29.9% in January.

In Kenya, President William Ruto introduced the elimination of fuel subsidies in September 2022. However, in August 2023, his government reinstated a small subsidy to stabilize retail fuel prices for the next 30 days, a reversal of government policy following public outrage at the high cost of living.

In January this year, the IMF criticized Kenya for reinstating fuel subsidies, saying that the lack of funds to pay oil traders could distort the budget.

As for the other country highlighted in the AfDB report, Ethiopia, the government began phasing out fuel subsidies in July 2022. By the end of January, regulators had excluded almost three-quarters of the country's transport companies from the fuel subsidy program, according to the Ministry of Transport and Logistics.

The Angolan government has announced the phasing out of fuel subsidies in June 2023, describing it as a necessary measure to promote sustainable economic growth that can deal with the "serious" challenges facing the country.

But last October, Angola's Finance Minister Vera Daves de Sousa said that the government would slow down the process, having learned a lesson from the June protests, when "society reacted with shock" to fuel prices.

 

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