Fisheries Minister Cadamiel Muthemba told Reuters the government will also encourage the development of aquaculture, which does not require intensive use of fuel.

"The government has scrapped tax on imported diesel, not only in the fishing sector, but the entire productive sector particularly agriculture and industry as a means to reduce the effects caused by the global increase of fuel prices," he said.

Last week the government said about 51 engine-powered fishing boats of 59 registered were no longer operating due to inability to buy fuel, and that the industry was headed for collapse.

"Fuel imports consume 60 percent of all our fishing revenues and this is a serious blow to the sector," Muthemba said.

"The situation is not normal and I cannot even imagine what will happen before the end of this year because we are facing difficulties."

Mozambique's fishing industry contributes about 3 percent to the country's Gross Domestic Product (GDP).

Revenue from shrimp, Mozambique's top fishing product, fell from to $78 million in 2007 from about $92 million in 2006, while deep sea prawns had also shrunk.

The government earlier cut the price of diesel fuel for private minibus taxis to end a wave of protests over high fuel prices and the rising cost of living in the southern African state.

The impoverished country, whose economy is now booming after years of civil war, says its economy is expected to grow robustly in 2008, and GDP growth is forecast at 8 percent, versus 7.5 percent in 2007.

But the bulk of its 20 million people continue to eke out subsistence living and many are mired in poverty in the former Portuguese colony.