Mozambique: No return to generalised fuel subsidies – Watch

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Mozambique: No return to generalised fuel subsidies – Watch

8:45 CAT | 01 Nov 2021

Photo: TVM

The Mozambican Minister of Economy and Finance, Adriano Maleiane, on Thursday told the country’s parliament, the Assembly of the Republic, that there can be no return to a regime of generalized fuel subsidies.

Reacting to opposition complaints at the rise in the price of liquid fuels decreed last week by the Energy Regulatory Authority (ARENE), Maleiane stressed that the basic reason behind this decision was the rise in the price of crude oil on the international market.

There was no way the government could absorb that increase, He recalled that when the previous government, under former President Armando Guebuza, decided to subsidise fuel distribution companies, it ended up, by 2015, with a debt to the companies of around 10 billion meticais (about 156 million dollars at current exchange rates, but worth much more in 2015).

Subsidising fuel companies, Maleiane said, meant that everybody, rich and poor alike, paid the same for their fuel. The subsidies were quite unsustainable and the government ran the risk of running out of money to import any more fuel.

At the time of the previous adjustment to domestic fuel prices, in November 2020, the price of a barrel of crude was about 43 dollars. By the time ARENE decided to increase prices, a barrel cost 74 dollars, and now it had reached 85 dollars.

While the government rejects generalised subsidies, it has no problem with targeted subsidies. Maleiane said the government is continuing to subsidise the fuel used by passenger transport operators, in order to keep bus fares low, and is importing more buses that are sold cheaply to private operators.

He added that, in the first half of 2022, the government plans to import gas powered buses, which will run on Mozambican natural gas, rather than on imported diesel.

The government also hopes to shift passengers from the roads onto the railways, Maleiane said the government will import a further 900 passenger carriages, for distribution among the southern and central rail networks.

The Minister pointed out that imported liquid fuels are currently costing Mozambique 850 million dollars a year. Total export earnings are about 1.3 billion dollars a year. So the equivalent of about two thirds of Mozambique’s export earnings are spent on fuel.

Maleiane added that, in working out any adjustment to domestic fuel prices, two factors are taken into account – the world market price of crude oil, and he exchange rate of the metical against the US dollar.

“At any moment we can know how domestic prices will evolve, if we look at the evolution of these two variables”, he said.

The calculations are supposed to be made every month – and if they show a movement of more than three per cent on the current price, either up or down, then the price should be adjusted accordingly. (In theory, this formula has been used for many years – but in practice it has often been ignored).

Maleiane claimed that the recent price rise should not have an impact on citizens’ lives – but in reality transport operators are demanding the right to raise their fares to compensate for the increased cost of fuel.

The government, Maleiane said, is working with the transport operators “so that we can have balanced fares”.

Watch the TVM report.