Maputo — In the wake of last week's riots in Maputo against price increases, the Mozambican government on Tuesday announced that it will subsidise bread, and reduced the announced increases in water and electricity tariffs.
Last Thursday the government spokesperson, Deputy Justice Minister Alberto Nkutumula, at the end of a Cabinet meeting, told reporters that the price rises were "irreversible". But today, after a second emergency Cabinet meeting, Nkutumula announced that several of the rises were indeed being reversed.
Perhaps the most significant is that the old price of bread will be restored, through the introduction of a subsidy. The government statement did not make clear whether the subsidy will be received by the bakers or by the milling companies.
In bakeries visited by AIM, a loaf that used to cost 5.5 meticais now costs 6.5 meticais. Smaller loaves rose from 4.5 to 5.5 meticais, and bread rolls from 1.5 to two meticais (at current exchange rates there are about 36 meticais to the US dollar). These increases range from 18 to 33 per cent - this disparity is largely because all coins smaller than half a metical have disappeared from circulation.
The government statement did not announce a date for bread to revert to its old prices.
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To reduce dependence on imported wheat, the government will promote bread made from a mixture of wheat flour and cassava flour.
The statement announced that the price of low grade rice will be cut by 7.5 per cent. This can be achieved by removing customs duty on this import. The surtax on imported sugar will be temporarily removed - even though Mozambique is more than self-sufficient in sugar, and the government had previously discouraged the import of sugar.
As for electricity, the government abolished the increase in the "social tariff" for consumers who use less than 100 kilowatt-hours a month. For those who use between 100 and 300 kilowatt-hours a month, the price increase is reduced from 13.4 to seven per cent. Richer consumers, who used over 300 kilowatt-hours a month, will pay the full increase.
Further measures will be taken to support low-income consumers of electricity, who should pay only about half the normal domestic tariff.
Households living in peri-urban areas can now be connected to the electricity grid for a connection fee of just 875 meticais, which can be paid in instalments whenever necessary.
Similarly there will now be no increase in water prices for those households who use less than five cubic metres a month. This "social tariff" remains fixed at 150 meticais a month. The cost of a new connection to the piped water supply is cut from 4,000 to 2,000 meticais.
The statement also promises that subsidies for urban passenger transport will be "maintained and guaranteed".
The government also announced austerity measures to raise funds for this range of direct and indirect subsidies. Thus the wages and allowances of all senior state figures (who include members of the government itself) are frozen until an assessment of state wages policy is completed. Likewise, the wages and allowances of all members of the boards of public companies, and companies where the state is the major shareholder, are frozen, and these wages must be paid in meticais, and not in foreign currency.
The government also promises to rationalize its own expenditure on air travel (particularly in business class), fuel, lubricants and communications.
No new institutions will be set up that involve additional costs for the state budget, and mechanisms for monitoring the movement of foreign currency into and out of the country will be strengthened.
All expenditure, the government insists, must be "fixed, invoiced and paid in the national currency, which will help preserve and value the metical".
The government statement gives no estimate as to how much the various subsidies will cost, or how much can be saved by the freeze on high level salaries and other austerity measures.
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It's true that almost all economies of the world are facing crisis. but it's also true that the situation can be controlled and maintained at the minimum satisfactory level, if that's the real willing and if resources are available. Mozambique has resources and potential to control that. the riots were not only due to price hikes. there has been an accumulation of rage within the Mozambican population. most public servants serve the public with political rather than social calculation. if all economies are facing same crisis, why don't all of these economies face riots? if we can provide the people with satisfactory services they will understand how much effort we put to grant them better living conditions.