Mozambique Government Balances Public Finances and Rising Living Costs

The Mozambican government is grappling with the dual challenge of managing precarious public finances while addressing growing public frustration over the rising cost of living. After failing to prevent bread price increases last week, authorities have introduced two new measures aimed at easing financial pressure on citizens. However, questions remain about how these benefits will be distributed between consumers and businesses.

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VAT Exemptions for Essential Goods

Parliament recently approved a measure to exempt sugar, soap, and cooking oil from value-added tax (VAT or IVA in Portuguese) until the end of the year. This initiative is projected to cost the treasury approximately MZN2 billion ($31 million), making the Ministry of Finance hesitant to extend these exemptions permanently. The opposition MDM party is pushing for similar tax breaks on electricity, water, and education services.

Ongoing Security Concerns