Mozambique: State debts to fuel distributors ‘almost unsustainable’ – GALP

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Mozambique: State debts to fuel distributors ‘almost unsustainable’ – GALP

8:23 CAT | 18 Nov 2022

FILE - For illustration purposes only. [File photo: Lusa]

The chairman of Galp Mozambique, Paulo Varela, said on Thursday he expected the results of dialogue between the sector and the government to resolve the almost unsustainable debt to fuel distributors in the country.

At issue is the fact that there are no price updates at service stations, which are well below the purchase value, accumulating a “very significant debt” by the state to fuel distributors, such as Galp, he said.

“This is an issue for the industry, not for any particular company, and the Mozambican Association of Fuel Companies (AMEPETROL)) has been in close dialogue with the government to find a solution,” Varela said in a meeting with journalists about Galp’s 65th anniversary in Mozambique.

“The companies continue to bear this cost which is reaching very significant amounts,” in a situation that “is not sustainable for much longer,” he said.

Varela said “this is an issue where, with dialogue and collaboration between all parties, a solution will be found,” referring to AMEPETROL for details about the amounts in question.

“At the end of the day, the cost will have to be paid for in some way”, he said; either the consumers will bear a price rise, or the state will subsidise distributors, or there is another way, depending on an “economic policy decision” in which each government “is sovereign”.

Despite “government efforts” to control the retail price by cutting taxes, “the problem in Mozambique and many other countries is the high international cost” of fuel, which is entirely imported.

Prices have remained high, despite some drops “in August and September,” meaning that “pressure continues,” he said.

In conjunction with the Mozambican Energy Ministry, work is underway to find “a mechanism that allows for continuity of supply and to avoid situations such as in Malawi, where there is an enormous fuel shortage due to factors that disrupt the supply,” Varela said.

“Mozambique, fortunately, has had a stable supply, entirely at the expense of the distribution companies bearing the difference,” he concluded.

AMEPETROL has been warning since the beginning of the year that the state’s debts to the fuel companies could paralyse distribution.

In total, according to information provided in April by AMEPETROL, the Mozambican government at the time owed the fuel distribution companies over US$110 million (€106 million).

Source: Lusa