Mozambique: Nyusi promises to alleviate cost of living – AIM report

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Mozambique: Nyusi promises to alleviate cost of living – AIM report

8:08 CAT | 16 Jun 2022

Mozambican President Filipe Nyusi on Tuesday promised the government will soon take measures, as yet unspecified, to alleviate the cost of living, rising due largely to increases in the world market price of fuel and grain.

Speaking in Maputo, at the ceremony where he swore into office the newly appointed Transport Minister Mateus Magala, and the Deputy Minister of Mineral Resources and Energy, Antonio Saide, Nyusi said the government is considering short term fiscal measures that will affect the cost structure of imported fuels.

These measures could include some form of subsidy for passenger transport. Nyusi admitted that such “extraordinary” measures could have a negative impact on the public accounts, but they might help mitigate the effects of the current price shocks.

“The government should immediately assess measures for relief”, said Nyusi, “with a focus that attacks the cost structure of fuels, as well as exchange management that might reduce the effect of the costs”. Here Nyusi appeared to suggest an administrative approach to the exchange rate, at least for some imported goods.

Nyusi announced that the government has already set up a team that is looking into solutions that could mitigate the impact of the generalised rise in prices that is hitting Mozambicans in their pockets.

“The cost of living is no longer just a song, and it’s not something to make jokes about”, he said. “It’s a reality in Mozambique, in Africa and the world”.

The government, he continued, is well aware of the effect of inflation on eroding the purchasing power of Mozambican families. “We are living through a moment, in which the economic conjuncture is characterized by inflationary pressures arising from the increased fuel and grain prices, which has affected all countries”.

The moment was one of crisis, he stressed, and it required firm intervention by the government.

Nyusi was doubtless worried by the likelihood that the fuel regulatory authority (ARENE) will soon declare another rise in the price of petrol and diesel. According to a report in the independent newssheet “Carta de Mocambique”, ARENE will increase the price of a litre of petrol from the current 83 meticais (1.3 US dollars, at the current exchange rate) to 93 meticais (an increase of 12 per cent).

Under the ARENE proposal, the price of a litre of diesel will rise from 79 to 96 meticais (21.5 per cent). The government may well be looking for a way to soften this blow.

According to the usually well-informed “Carta de Mocambique”, the fuel distribution companies wanted much higher rises – 98 meticais for a litre of petrol and 103 meticais for a litre of diesel. The government rejected that proposal.

The companies complain that they are running at a loss and that the government owes them 140 million dollars. This money should have been paid into a compensation fund for the fuel companies, but that fund is empty. This situation could endanger fuel imports later in the year.

One strong argument in favour of the fuel price rise proposed by ARENE is that it would bring prices in Mozambique into line with those in South Africa. Currently Mozambique is subsidizing South African truckers, who cross the border to fill up their tanks with the cheaper Mozambican fuel.