The government announced on March 29th that it would abolish the controversial subsides for fuel and wheat flour. Instead, the government is to use targeted programmes in the ostensible hope of maximising the benefit to the poor. The government's plan is to issue cards to students and workers entitling them to cheap fuel from August, when the fuel general subsidy will be withdrawn. However, this intervention also appears to be poorly targeted in terms of alleviating hardship among the poorest, as neither students nor those in employment can be considered to be among the most vulnerable. Rather, the government is probably keen to offer sweeteners to these groups, as they are among the most likely to mobilise for destabilising demonstrations. Nonetheless, the rise in fuel prices that will follow the end of the general price subsidy still poses significant political risks for the authorities.

Wheat and rice subsidies will be replaced in June by a new scheme providing a subsidised basket of goods, worth around MT824 (US$26) a month, for people with monthly earnings of less than MT2,500. Although this is more targeted than a general price subsidy, a government spokesman, Victor Borges, has estimated that nearly 2m people could benefit from the programme. Thus, depending on take-up, the new scheme represents a multi-million-dollar liability for the government. In a gesture of solidarity, the government announced that salaries for ministers and other high-ranking state officials would be frozen.

Since the authorities introduced fuel and bread subsidies the programmes have been criticised as an inefficient and costly use of public funds for achieving poverty reduction. Fuel subsidies were meant to address rising urban transport prices, although the measure benefited the poor and non-poor alike, as all strata of society use either public or private transport. Moreover, there have been reports that some of the subsidised fuel was smuggled to neighbouring countries. Consequently, Mozambique's fuel import bill-and the cost of the subsidy-has risen sharply. The government paid fuel importers US$147m to cover the subsidy last year and has still not fully covered outstanding costs, which are to be paid off in the coming months. The decision to provide wheat flour subsidies, essentially for bread, has been criticised as inefficient for similar reasons, but also because bread is not a traditional staple food in Mozambique but rather an aspirational product favoured by urban and wealthier populations. Maize meal and other coarse grains remain the staple diet for much of the population of Mozambique, particularly the poor. However, the overriding concern of the government has been to avoid a repeat of the bloody unrest that the withdrawal of subsidies sparked in September 2010.

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