MAPUTO– The generalised fuel subsidies introduced by the previous Mozambican government under former president Armando Guebuza has led to the government owing huge debts to the fuel distribution companies which the current government has not yet been able to pay off in full.

This was stated here Tuesday by Almirante Dimas, the deputy director of hydrocarbons and fuel in the Ministry of Mineral Resources and Energy, who told a media briefing that between 2011 and 2014, the Guebuza government ran up a debt to the distribution companies of 330 million US dollars.

Although, the current government has abolished indiscriminate fuel subsidies, there remains a debt equivalent to 77 million dollars still be repaid and Dimas said the government is committed to clearing this debt, but cannot do so immediately.

The compensation for subsidies was thus being paid gradually to the companies and Dimas warned that failure to compensate the companies would put the country at risk of simply running out of fuel.

The government has now lifted the freeze on fuel prices and reverted to the practice of reviewing prices every month, and altering them whenever the cost of importing liquid fuel, when priced in Mozambican meticais, moves in either direction by more than three per cent.

This mechanism is enshrined in a government decree of 2012, which the Guebuza government had ignored. The generalised subsidy had perverse effects as it benefited those who owned a car, and therefore subsidised the rich.

Since fuel in Mozambique was cheaper than in neighbouring countries, the subsidy also encouraged motorists from South Africa or Zimbabwe to cross the border and fill up their tanks in Mozambique.

Importation of liquid fuels in Mozambique is in the hands of IMOPETRO, an association of all the fuel distribution companies active in Mozambique. All the companies are obliged to be members of IMOPETRO, and this single import mechanism ensures economies of scale.

Currently a litre of petrol costs 65.01 meticais (about 1.06 US dollars). However, IMOPETRO General Director Joao Macandja told the journalists that, if IMOPETRO did not exist, and each fuel company imported its own requirements, the average price of petrol would soar to around 90 meticais a litre.

The return to monthly price adjustments means that Mozambican fuel prices are no longer greatly out of line with those in the rest of the sub-region. Only in Tanzania is petrol significantly cheaper — at the equivalent of 57.79 meticais a litre.

In South Africa the current price is the equivalent of 68.16 meticais a litre, and in Malawi it is 68.48. Zimbabweans, however, might still find it worth their while to cross into Mozambique to buy fuel � the Zimbabwean petrol price is the equivalent of 97.76 meticais a litre.