Ananias Nhantumbo of SOICO was a participant on 'Financial and Economic Reporting' Maputo, June. The course was sponsored by NORAD.
MAPUTO (Mozambique) – Temporary employment schemes and direct subsidies of essential foods in Mozambique could be effective ways to protect low-income families against price rises as an alternative to the government’s suspended ‘Basic Food Basket’ plan, according to the International Monetary Fund (IMF).
The Mozambican government announced plans in March to eliminate gradually its fuel subsidies and to replace them with the ‘Basic Food Basket’ or ‘Cesta Basica’ – a programme designed to help the country’s poorest to cope with rises in food and fuel costs. The aim was to give workers under a set wage threshold access to cheaper basic foods and transport passes.
But the programme met with problems from the start with economists citing high administrative costs and questioning whether the scheme would benefit the most vulnerable sectors of the population. The scheme has been suspended pending further studies and amid confusion over its criteria and implementation.
“It (the Cesta Basica) involved an administrative system that was going to take a long time to implement and was going to be very expensive, when perhaps there are some less costly alternatives, from an administrative point of view, that could be implemented a lot faster,” Victor Lledo, the IMF’s resident representative in Mozambique, told journalists from Portuguese-speaking African countries in late June.
“There are temporary employment schemes for public works. For example, these women you see here in Maputo collecting rubbish have temporary jobs,” Lledo told the journalists who were participating in an economic and financial journalism course organised by the Thomson Reuters Foundation and the Norwegian Agency for Development Cooperation (NORAD).
Lledo said India had adopted a temporary employment scheme a while ago, under which people are employed for a set number of days per year.
Lledo also said that some existing Mozambican programmes involving food subsidies that were more targeted to low-income families could be extended and would prove more effective than the Basic Food Basket scheme.
The Mozambican government should implement a short-term system of social protection to mitigate sudden price shocks, while at the same time adopting longer-term measures to boost production in labour-intensive industries, Lledo said, speaking to the course held at Mozambique’s parliament.
The government should also invest in tourism, in growing the private sector and in increasing agricultural productivity to generate work and ensure food production, he added.
The ‘Basic Food Basket’ programme was designed to benefit people living in provincial capitals with a monthly income of 2,500 meticais ($88) or less. The plan was to select, via public tender, shops that supplied basic foodstuffs such as rice, fix, corn flour, beans, cooking oil and bread. The beneficiaries would receive a subsidy to the value of 840 meticais at the point of sale and the government would then compensate participating stores.
However, the administrative costs of the programme were estimated at 202 million meticais, almost two thirds of the total estimated cost of the programme of 336 million meticais.
COSTLY FUEL SUBSIDY
Lledo also said the government’s current fuel subsidy was costly and does not benefit those who most need it. The government spent 100 million dollars on its fuel subsidy last year alone, or about 1 percent of the country’s Gross Domestic Product (GDP), he added.
“This is budget money that could be used to finance other programmes, such as medium-term education and health programmes and alternative social protection schemes that are more targeted,” he said.
The government has yet to make an announcement about the future of the ‘Basic Food Basket’.
Despite Mozambique’s strong growth – forecast by the IMF at 7.25 percent this year when adjusted for inflation – the country is vulnerable to international increases in the price of food and fuel that push up local inflation and hinder efforts to fight poverty.
Lledo said it was important to find ways to ensure the country’s rapid growth is inclusive and benefits the whole population. He stressed the need for a competitive and diversified export industry, better handling of natural resources and stronger social protection systems that enabled the most vulnerable to resist sudden increases in prices of food and fuel.
Our Standards: The Thomson Reuters Trust Principles.
