Mozambique government cuts bread subsidy: Market will make the price

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Mozambique government cuts bread subsidy: Market will make the price

8:39 CAT | 31 Mar 2017

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The Mozambican Ministry of Industry and Commerce announced today the removal of the bread subsidy as from Saturday, stating that the circumstances that led to the introduction of compensation to bakers are no longer in place.

At a press conference today in Maputo, Nelson Jeque, a spokesman for the Ministry of Industry and Commerce, said that the government will no longer channel the subsidy to the mills any more, hence each bakery should price according to market rules.

“Market laws will make the price, supply and demand will determine the cost of bread,” said Jeque.

The Ministry of Industry and Commerce spokesman said that the decision was determined by the fact that the metical has recovered against the dollar, allowing the replacement of import power, the fall in the price of wheat in the international market and the weight of the subsidy on the public treasury.

“As we introduced the current allowance, the metical was between 76 and 75 to the dollar and it is now at 67 [meticas],” said Nelson Sheikh.

On the other hand, he continued, market studies indicate that the subsidy did not have a major impact on the consumer price, since the subsidized bakeries sell the bread at a price very close to those that do not receive subsidy.

“The difference in the price of bread between the bakeries who receive subsidy and the ones that do not receive is between one metical and 50 cents,” stressed Sheikh.

According to a spokesman for the Mozambican Ministry of Industry and Commerce, the government spent 330 million meticais [EUR4.5 million] on bread subsidies between July 2014 and February this year, a high value in the face of economic difficulties that the country is going through.

Last week, the Mozambican executive decided to increase the price of fuel, taking a step towards completely removing the subsidy to this resource, despite ensuring that it will maintain the compensation to public passenger carriers.

The Mozambican government decided to introduce a subsidy on bread and fuel following violent demonstrations against the cost of living in 2010.