Mozambique to raise food and fuel prices, takes steps to avoid Middle East-like protests

Reuters, Wednesday 30 Mar 2011

Government will impose taxes on major mining companies to subsidise 2 million poor two months after raising prices

Mozambique will raise food and fuel prices from April but subsidise food for 2 million poor, to avoid the sort of protests that have rocked North Africa and the Middle East, a government official said on Wednesday.

Planning and Development Minister Aiuba Cuereneia said the decision was taken after this week's cabinet meeting.

"We will review the fuel prices between April and June but the rise will not go over 10 percent," he told Reuters.

The government was forced to reverse a 30 percent bread price increase last year after a week of riots in which 13 people were killed.

From August, Mozambique will subsidise nearly 2 million people to mitigate the impact of these increases and will use taxes on major mining companies -- which form a growing part of the economy -- to cover this support.

Mozambique has some of the largest yet untapped coal reserves and companies such as Australia's Riversdale and Brazil's Vale have invested in the sector.

"We will provide (parcels) that consist of cereals, rice fish and cooking oil to the people who are receiving the minimum statutory wage and they will also benefit from subsidized public transport," Cuereneia said.

"The prices of food and fuel are rising due to the situation in Japan, North Africa and the Middle East, therefore we want to take measures to prevent similar (protests) here," he said.

International food and oil prices have climbed, stoking inflation across the globe and fears of the repeat of the 2008 food price crisis that saw worldwide protests.

About 70 percent of the 23 million people in the southern Africa nation live on less than $2 a day.

Cuereneia said that senior state officials would also not receive salary increases for the second year straight and that austerity measures introduced last year would remain in force.

The government last year froze salary and allowance increases for senior officials and curbed foreign travel.

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