Tuesday,23 April, 2019
Current issue | Issue 1148, 16 - 22 may 2013
Tuesday,23 April, 2019
Issue 1148, 16 - 22 may 2013

Ahram Weekly

In the shadow of rising prices

As the pound continues to fall against the dollar, more and more people are finding it hard to make ends meet

Al-Ahram Weekly

A post-revolution drop in tourism and foreign direct investment has deeply harmed the economy as well as the Egyptian pound. Hayat Yehia
examines how the dollar’s rise against the pound has affected all aspects of life and interviews head of resear

“I now buy only half of my household needs of fresh produce because of the high prices,” admitted Umm Badawi, a janitor at a nursery. Her husband is an ordinary worker “and his wages added to mine were not enough before. Today, things have become even more difficult after the recent price rises.”
While Umm Badawi has tried to address the problem by reducing the amount of produce she buys, Sabrine, a housemaid, has started to stock up on essential vegetables, such as tomatoes, when their prices drop so she can use them when prices skyrocket again. “When the price went down to LE1.5 per kilo, I stocked up the freezer. It was very helpful when prices later doubled to LE3,” she said.
Amm Ali, a door porter, has decided to eliminate fruit altogether from his diet to help pay for daily essentials.
More and more Egyptian families are having to take such measures in order to deal with the sharp hikes in the prices of food triggered by the rise of the dollar against the Egyptian pound, and this could lead to mass protests.
According to Samir Mustafa, an economics professor and agricultural policies specialist at the Planning Institute, some 25 per cent of Egyptians live below the poverty line, and about 40 per cent are poor. Mustafa explained that eliminating energy subsidies, as the government is planning to do, could result in mass strikes, because it would lead to more price hikes.
“Energy is part of all production and service operations,” he explained. “Even a phone call requires energy.” Citizens are losing confidence in officials because it seems there is no vision or hope for improvement, he said, especially “after the cabinet reshuffle which promoted ministers who lack experience and expertise.”
Retailers are constantly peppered with questions by angry customers who do not know why prices are so high and sometimes even double without notice. “Every time we go to buy from wholesalers, they raise prices and we are forced to increase our retail prices as a result,” one shop-owner said.
The dilemma of companies importing materials from abroad has been compounded because not only are prices higher now, but it is also difficult to obtain the hard currency needed to make purchases.
Mohamed Al-Helw, president of Al-Helw Ikwan in 10 Ramadan city which works in sugar beet cultivation, said his company had trouble importing seeds and fertiliser as well as harvesting machines. “We get the money we need with great difficulty, and when we do the prices are much higher than the official price at the Central Bank,” Al-Helw complained.
This businessman’s predicament is no different from that of other importers, whether for raw materials, or manufacturing or finished equipment. But what concerns officials most is the probability that they could fail to meet the needs for subsidised commodities, such as wheat, sugar, rice and cooking oil.
A report submitted by the minister of supply to the prime minister at the end of April was disturbing in this regard, and the opposition used it to discredit the government. The report revealed that stocks of these commodities were not enough to cover a safe period, and that wheat (local and imported) stocks now amounted to 1.74 million tons, which will only last until 25 June, but could stretch until 29 June with the arrival of shipments from already signed contracts.
Stocks of cooking oil will last until the end of June, and of sugar until October. Rice reserves have already run out, although they were supposed to cover supplies for ration cards until the end of April.
Wheat is the key food that the state pays for, and Egypt is the largest importer of this type of grain in the world, although local production has grown in recent years to cover 45 percent of consumption, only standing at 25 per cent in 1980.
This increase has been achieved through bio-engineering to increase the yield of each feddan. The problem of wheat always emerges when Egypt is facing foreign currency shortages, because it is a non-flexible commodity, meaning that the way people consume it — relying on it to make bread — makes it impossible to reduce production without threatening food security.
Without flour and subsidised bread, there could be a risk of “a hunger revolution” in a country where a quarter of citizens live below the poverty line. It is for this reason that the government has been keen to continue the subsidy to stabilise the price of bread at LE0.05 a loaf.
“Even if it had to pay billions of dollars to buy it, finding dollars to buy wheat is a red line that cannot be crossed,” said Noemani Noemani, an adviser to the minister of supply who previously served as director of the Supply Commodities Authority (SCA) in charge of import and export contracts for subsidised commodities such as wheat, cooking oil, sugar and rice.
The government hopes that this year’s abundant wheat crop will relieve the pressure on foreign currency reserves over the next six months, which is the safe period needed to guarantee the wheat reserves.
Noemani said that production this season has already reached around 9.5 million tonnes. The government plans to send 4.5 million tonnes to the SCA, compared to 3.7 million tonnes last year, and the rest will be left with farmers to meet their individual needs.
If predictions are correct, this will save the dollar cost of importing 800,000 tons of wheat. The more the farmers can supply, the lower the burden on the available dollars in Egypt will be.
Although many factors influence the commitment of farmers to supply the SCA, or even grow wheat in the first place, this year the government has decided to buy wheat from farmers at international prices in order to encourage them to grow it.
Noemani said the price the government had announced was even higher than world prices, since it would pay LE400 per erdab (c. 70kg), which means one tonne will be priced at $432.
Noemani was concerned that this could tempt greedy importers to bring in more foreign wheat and sell it to the SCA, while claiming it was locally produced and thus make a profit. This would put more pressure on the dollar, and he therefore urged strict supervision of markets to prevent cheating.
He said that other commodities were not such a heavy burden on the dollar because shortages were not as serious. Local production was enough to meet demand, and the government could obtain the commodities locally. Cooking oil cannot be imported in large volumes because it is a perishable commodity.
Although Egypt does not produce enough food to meet its domestic needs and imports around one million tons of sugar a year to fill the gap between consumption and production, over the past two years it has accumulated large quantities of sugar reserves. This is a risk to local production because importers continued to buy sugar in large amounts after its price dropped worldwide.
Abdel-Hamid Salama, head of the Delta Beet Sugar Company, said there was a need to ban sugar imports to save foreign currency reserves and redirect them to more urgent needs. There were enough sugar reserves until October 2014, he said.

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