Lightening the load
The government is currently reconsidering its means of targeting subsidies of basic food commodities to reach low-income citizens.
Mona El-Fiqi reports.
The government is currently reconsidering its means of targeting subsidies of basic food commodities to reach low-income citizens. Mona El-Fiqi reports.
In response to consumer complaints about the continuous increases in prices of basic food commodities, the government last week announced that it is committed to reducing the prices of essential food commodities to reach levels preceding the flotation of the foreign exchange rate in January 2003.
During a cabinet meeting last week Prime Minister Atef Ebeid decided to expand the commodities subsidy programme to include nine basic food commodities including beans, bread, rice, food oil, tea and macaroni for low-income citizens directly to consumers. To meet the government's commitment to the new subsidy programme, the Ministry of Finance will provide LE3.5 billion, Ebeid announced.
Moreover, the cabinet discussed a report on the increasing prices of raw materials on the global market. A study comparing prices of products before and after the flotation of the foreign exchange rate was also discussed during the meeting.
Ebeid announced that the government will present a final report on its strategy for controlling prices to President Hosni Mubarak.
Three options have been suggested by the cabinet. The first is to simply provide lower-income citizens with direct cash subsides. Another alternative in the form of nine basic subsidised commodities directly to these consumers. The third option is to use the subsidies to bring down the prices of commodities in markets in general.
Hamdi Abdel-Azeem, president of El-Sadat Academy for Management Sciences argued that providing cash to increase salaries is not an ideal solution since it might cause another bout of inflation.
The best way to bring prices down, according to Abdel-Azeem, is for the government to provide large quantities of high quality basic food commodities at reasonable prices in the public sector cooperatives. "This will force the private sector to reduce the prices of their products and strike the balance at the markets," added Abdel-Azeem.
The government has yet to address the question of the budget difficulties aggravated by the additional LE3.5 billion in expenditures, according to Abdel-Azeem.
