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Angola's oil revenue crunch induces policy shifts

Tuesday, March 3, 2015

Subject

Angolan economic policy.

Significance

Parliament on February 24 voted to cut the national budget by 25% in response to low global oil prices, which caused a 57% slump in oil earnings in January 2015, compared to the same period in 2014. Angola relies on oil for approximately 95% of export earnings and 80% of tax revenues. With elections looming in 2017, the Eduardo dos Santos government is taking steps to ensure stability and entrench its power.

Impacts

  • Protests over rising living costs will concentrate in Luanda (which MPLA lost in 2012), potentially prompting more troop deployments.
  • Political control of the sovereign wealth fund may direct it to invest in social programmes, but this could hurt its commercial viability.
  • The small, largely public sector-employed middle class has usually avoided voicing dissent, but rising living costs could change this.
  • Opposition calls for dos Santos to step down are likely to increase, but his strong military backing will preclude this scenario.
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