Mozambique: State mobilises $135M in subsidies to help address inflation – Watch

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Mozambique: State mobilises $135M in subsidies to help address inflation – Watch

7:36 CAT | 11 Jul 2022

Photo: TVM

The Mozambican government announced on Friday it had mobilised US$135 million (132.6 million euros) with the support of partners to provide subsidies to the public to help address the global inflation caused by the war in Ukraine.

“The government has mobilised resources to ensure that there is stability in the prices of public transport, and has already mobilised US$50 million for this purpose,” said Max Tonela.

The Minister of Economy and Finance was speaking in Maputo at a press conference with Abebe Selassie, director of the African department of the International Monetary Fund (IMF), which is visiting Mozambique to assess the scenario and learn about the government’s measures.

Max Tonela for the first time attributed a figure to the “passenger subsidy” that had already been announced a week ago by the Mozambican authorities, but about which details were awaited regarding application.

“Even if there are additional increases” in the price of fuel, “the public in urban centres” will be “protected, at least for the next six months,” the minister said, with a view to the situation improving in the meantime – or rather, that oil will once again trade at under US$100 per barrel.

The minister said today that the subsidy is being “fine-tuned” with the sector’s association.

“In addition, we have mobilised $85 million” to “finance more disadvantaged families, increasing the numbers of households covered and the amount to be allocated” under the State’s social support, particularly in urban outskirts and rural areas.

These measures are in addition to reformulations in the calculation of fuel prices, decided by the government since March to mitigate the three increases this year, Tonela noted, adding that other support may be discussed.

Abebe Selassie acknowledged the difficulties, said the IMF may give extra financial help and gave a positive note to the announced measures.

“I think the direction Mozambique has been taking is right,” Selassie said.

The Fund approved on May 9 a new financing programme for the country – the first after the suspension caused in 2016 by the hidden debts scandal – worth $470 million (462 million euros) until 2025, with $91 million (89.45 million euros) made available immediately.

“We recognise these challenges and stand ready to assist governments, including with additional funding” around measures that can “cushion the effects of this crisis on the most vulnerable,” he noted.

“This cost of living crisis affects the population in an amplified way here, because people have fewer resources and resilience to cope with such a shock,” Selassie said.

Abebe Selassie is visiting Mozambique “to learn more about the situation in the country and to convey this to the management” of the IMF.

Since Thursday he has met with the country’s president, prime minister and governor of the central bank.

The visit comes after trips to Senegal and Chad.

“What I see are countries, ministers, governments having to make difficult decisions,” he acknowledged, reiterating IMF support.