September 7, 2010 / 1:47 PM / in 7 years

Mozambique to reverse bread price hikes: minister

MAPUTO (Reuters) - Mozambique’s government will reverse a bread price increase after food riots in which 13 people were killed last week, the planning minister said on Tuesday.

<p>Police patrol the streets of Mozambique's capital, Maputo, September 3, 2010. Mozambique's capital Maputo got back to work on Friday after two days of rioting, triggered by a sharp hike in bread prices, which the government said left seven dead, 288 injured and millions of dollars of damage. REUTERS/Grant Lee Neuenburg</p>

The 30 percent rise in the price of bread due to soaring global wheat prices sparked the worst riots since 2008 in the southern African country, one of the world’s poorest.

“The government has agreed to keep the old price of bread and the costs would be met by subsidies,” Planning and Development Minister Aiuba Cuereneia told reporters.

President Armando Guebuza’s government previously said it was helpless because of the spike in wheat prices linked partly to drought and fires in Russia.

The United Nations special rapporteur on the right to food, Oliver De Schutter, warned on Tuesday that the Mozambique riots should be a wake-up call for governments which had ignored food security problems which arose two years ago.

Police fired rubber bullets, live ammunition and teargas during the three days of protests over the bread price hikes and increases in water and electricity tariffs in Mozambique last week. Among the dead were two children.

The government-imposed price rise took the cost of a bread roll -- the bread staple of Mozambicans -- to 20 U.S. cents in a country where the average worker earns around $37 a month.

Mozambique also depends heavily on imports from South Africa which have become more expensive as the South African currency rose. Mozambique’s metical has lost around 29 percent against the dollar and 33 percent against the rand this year.

Cuereneia said the government would also encourage local businessmen to use the metical when making payments in a bid to help strengthen the unit.

Two weeks ago the government imposed a ban on using dollars to pay school, university and hospital fees.

Cuereneia said old prices of imported food like some vegetables and rice would be maintained through the reduction of customs duty and value added taxes.

Electricity price increases would also be rolled back while new water connection fees would be reduced by 50 percent.

The government will introduce austerity measures to help fund the subsidies by freezing salary and allowance increases for senior government officials and curbing foreign travel.

Analysts said the bread price about-turn would put pressure on an expansionary budget designed to tackle Mozambique’s lack of roads and electricity, a legacy of years of civil war.

Consequently, the government would have to rely more on foreign direct investment and external aid flows, both of which could fall victim to another global economic slowdown, said analyst Celeste Fauconnier of FirstRand in Johannesburg.

“It will definitely put further strain on the budget,” she said.

The government estimated that the riots caused damage of 122 million meticais in the former Portuguese colony where 70 percent of people live on less than $2 a day.

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