Higher Fuel and Food Prices : Impacts and Responses for Mozambique

The dramatic increases in world food and
fuel prices during 2007 and early 2008 may set back
Mozambique's considerable advances in poverty reduction
during the past decade. This study assesses the impact of
higher fuel and food prices at both household and
macroeconomic levels, and also considers policy options to
mitigate some of the negative impacts of higher prices.
Rising world prices certainly represents a negative
terms-of-trade shock for Mozambique, since the country
imports almost all of its fuel and is a net importer of
food. The report is structured in six sections. Section two
presents information on the extent of international food and
fuel price increases and their transmission to local markets
in Mozambique. Section three presents household-level
analysis focused on the first order impact of the food price
increases. Section four complements previous sections by
examining the impact of higher food and fuel prices within a
general equilibrium framework. Section five discusses the
likely impact of alternative policy options in the short and
long term. Section six summarizes and concludes.