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Mozambique: Government to Propose Budget Amendment
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Agencia de Informacao de Mocambique (Maputo)
25 February 2008
Posted to the web 25 February 2008
Chidenguele
The Mozambican government will shortly submit to the country's parliament, the Assembly of the Republic, an amendment to the 2008 budget, in order to include the subsidy on the diesel used in urban passenger transport.
Announcing this decision on Saturday at a seminar on fiscal policy held in the tourist resort of Chidenguele, in the southern province of Gaza, Finance Minister Manuel Chang, claimed that the reduced price of diesel for private transport operators was not a subsidy at all, but "compensation", because the private transport operators have agreed not to put up their fares.
The price of diesel rose by 14 per cent (because of the rise in the world market price of oil) on 23 January, to 35.35 meticais (about 1.47 US dollars) a litre. This led to demands from the owners of the privately owned minibuses (colloquially known as "chapas") that provide much of the passenger transport in Mozambican cities for a fare rise.
Negotiations between the government and the Federation of Road Transport Associations (FEMATRO) led to agreement on new fares. A journey of up to five kilometres would now cost 7.5 rather than five meticais (a rise of 50 per cent), while longer urban journeys would rise in cost from 7.5 to 10 meticais (a 33 per cent increase).
The negotiators had not taken public reaction into account. When the new fares came into effect, on 5 February, serious rioting brought Maputo to a standstill. With barricades blazing in the streets, the government and FEMATRO rescinded the fare increase.
In exchange FEMATRO demanded compensation for its members, and after several days of further negotiation, it was agreed that chapa operators could buy their diesel at the old price of 31 meticais a litre.
On Saturday Chang confirmed that the difference between 31 and 35.35 meticais would have to be made up by the state. "After the government's decision to compensate the transporters, the money would have to come from somewhere, and that somewhere can only be the state budget", he said. "That's why we're going to bring an amendment to the budget to parliament".
The budget is already heavily dependent on foreign grants and loans. The deficit before grants currently stands at 56 per cent. Chang admitted that the fuel subsidy will worsen the budgetary position, and may oblige the government to request more support from foreign donors.
The problem is that the government has already announced that if, in the near future, diesel prices rise again, the chapas will still only pay 31 meticais a litre. The subsidy (or compensation) is thus not a fixed sum, and if the government misguesses oil price trends, it may find itself in the embarrassing position of going back to the Assembly later in the year to seek a further budget amendment.
Of course, oil prices can go down as well as up, and if the international price slips, then the price at the pumps may fall back to, or below, 31 meticais a litre, and then no question of subsidy arises. But no-one is banking on that.
Speaking at the opening of the seminar, Chang pointed out that the 2008 budget envisages collecting state revenue (overwhelmingly from taxes) of 38.8 billion meticais (about 1.6 billion US dollars). This is 15.9 per cent of Gross Domestic Product, and is an increase of 0.5 per cent of GDP on the target laid down for 2007.
Among the measures adopted to ensure that this target will be reached are expansion of a computerized tax system, as pat of simplifying procedures, improvements in tax legislation (though amendments to the tax codes passed last year), and "rationalization" of tax exemptions, particularly for mega-projects.
Chang also promised to establish the long awaited Fiscal Tribunals and to consolidate the Customs Tribunals. He said these were measures to speed up decision making, and debt recovery.
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The Minister told reporters that, from the point of view of revenue collection, 2007 had been "very positive", because the target set in the budget had been exceeded by three per cent.
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| Copyright © 2008 Agencia de Informacao de Mocambique. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections -- or for permission to republish or make other authorized use of this material, click here. | |||||||||||||||||||||||||||||
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