Madrid, 28 March 2023 (dpa/MIA) – Portugal's left-wing government plans to temporarily suspend the value-added tax on 44 basic foodstuffs for six months to curb high inflation, Prime Minister António Costa announced.

The measure was part of a deal signed with producers and traders aimed at stabilizing prices, Costa said in Lisbon late on Monday. Financial support to farmers and cattle breeders is also planned as part of the deal, which is set to cost €600 million ($650 million).

The suspension of VAT on bread, pasta, rice, milk, eggs, yoghurt, cheese, vegetable oil, butter, meat and fish could be extended after the initial six-month period, he said. The rate for basic foodstuffs is set at 6%.

The legislative package has yet to be passed by parliament, where Costa's government enjoys a majority.

Annual consumer inflation in Portugal hit 8.2% in February, slightly below the 8.5% recorded for the euro area, of which Portugal is a member. But food inflation recently topped 20.1%.

In Portugal, many people are having difficulty making ends meat due to significantly lower salaries compared to other countries in Western Europe.

Costa attributed high inflation primarily to the Russian invasion of Ukraine and cautioned that price rises could continue even after the measures took effect.

"Nobody knows how long this war will continue, and for as long as it does continue, there is a risk that production costs will rise further," he said.