Monday, 28 November 2011

Food subsidies in Mozambique

Earlier this year (May/June) the Mozambican government announced that they would be switching from generalized subsidies on fuel, bread and rice to a more targeted subsidy programme. This would both reduce costs and focus subsidies on families living on less than $2 a day. The old subsidy system, focused on bread, rice and fuel, ended up being of more value to the minority (and generally slightly less poor) urban population, rather than helping rural people, who make up the majority of Mozambique's poor.

This week, the issue was discussed in the Mozambican parliament. Buried in this story about parliamentary procedure and whether the opposition's request for more floor time was legitimate, the government of Mozambique has now said that the subsidized food basket approach they had been talking about is in fact going to be an emergency measure that would only be activated should food prices drop below a particular (unspecified) level. The Prime Minister pointed out that there has been a good harvest this year and that the Mozambican currency has strengthened against the dollar and the rand, making the very large proportion of the country's food that is imported cheaper.

None of this answers Renamo's seemingly legitimate questions about what happened to the plans to introduce a more regular subsidy (rather than an emergency measure). With a huge population struggling with food insecurity and poverty, it does not seem out of line for Mozambique to shift to using a more targeted food subsidy approach. But removing the subsidy altogether when so many people people are poor and hungry seems problematic. Food prices may not be rising as rapidly as they were this time last year, but they're still higher than many people can afford.

The Prime Minister also failed to account for the 335 million meticais (12.4 million US dollars) budgeted for this scheme. International financial institutions don't like subsidies because they're not sustainable and can skew markets, but in one of the poorest countries in the world, the government has kept people alive by subsidising necessities. If the government has suddenly abandoned the policy of subsidising food and is unable to account for the money that should be feeding people, Mozambique faces bigger problems than market inefficiencies.

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