FLOUR SUBSIDY REDUCED

Mozambique’s Minister of Industry and Trade, Armando Inroga, on Monday announced a 25 per cent cut in the flour subsidy which the government pays to the country’s bakers.The subsidy was introduced after the Maputo riots against price rises of 1-2 September last year. In order to keep the price of bread at its pre-riot level of five meticais for a 250 gram loaf, the government paid a subsidy of 200 meticais for every 50 kilo sack of wheat flour used by bakers.Inroga announced that this subsidy has been cut to 150 meticais per 50 kilo sack. He promised that this would have no impact on the price of bread. On a tour of Maputo markets on Monday, Inroga told reporters that the government could cut the subsidy because the price of imported wheat, when expressed in meticais, has fallen. This is due entirely to the sharp appreciation of the metical against the US dollar. When the flour subsidy was introduced in September 2010, the average exchange rate quoted by the Bank of Mozambique was 36.5 meticais to the US dollar. The rate quoted on Tuesday is about 28.5 meticais to the dollar.Inroga said the 25 per cent cut in the subsidy was introduced two weeks ago in the central port city of Beira, and extended to flour used by bakers in Maputo on Monday. Holding the price of bread down did not cost as much as the government feared, Inroga revealed. The sum estimated in the budget to cover the flour subsidy for the period up until June was not fully spent, because the price of wheat did not rise as had been predicted at the end of 2010.