Sunday,22 October, 2017
Current issue | Issue 1180, (16-22 January 2014)
Sunday,22 October, 2017
Issue 1180, (16-22 January 2014)

Ahram Weekly

Inflation up in 2013

Slower economic growth and monetary stimulus by the Central Bank pushed the inflation rate up for 2013, writes Mona El-Fiqi

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eco22
Al-Ahram Weekly

Egypt’s inflation rate for 2013 as a whole came in at 10.3 per cent compared to 7.5 per cent in 2012, according to figures issued by the Central Agency for Public Mobilisation and Statistics (CAPMAS). Experts attributed the increase to the pound’s devaluation against the dollar, the economic slowdown and the Central Bank of Egypt’s printing more cash.
Other reasons provided by Abu Bakr Al-Guindi, the CAPMAS chairman, included the low growth rate, which stood at two per cent in 2013, few job opportunities, and a sharp reduction in foreign direct investment flows to Egypt.  
Omneya Helmi, research director at the Egyptian Centre for Economic Studies, told Al-Ahram Weekly that the high growth rate in prices in 2013 had been expected. “As Egypt is a net food importer, the total imports bill including for food and raw materials rose significantly due to the pound’s devaluation,” she said.
Egypt’s imports increased to $4.583 billion in October 2013 from $4.142 billion in September. The pound has lost more than 15 per cent of its value against the dollar since the 25 January Revolution, falling from LE5.9 to about LE7 currently.
Moreover, according to Helmi, there was a clear relationship between the increase in unemployment and the inflation rate simply because high unemployment meant less production and limited supply against demand. Egypt’s unemployment rate hit over 13 per cent in 2013, according to official figures.
As Egypt continued to suffer from political instability and a lack of security measures during 2013, transportation costs between the different governorates increased as well as shipment insurance due to perceptions of higher risk, both of these things adding to costs and reflected in prices, Helmi said.
Anwar Al-Naqeeb, an assistant professor at Al-Sadat Academy for Administrative Sciences, had doubts about the inflation figure announced by CAPMAS as he believed that the measures used in calculating it might not be accurate. “CAPMAS needs technical assistance to upgrade its methods in order to reach international standards,” he said.
Al-Naqeeb, who blamed the Central Bank of Egypt (CBE) for being responsible for the high inflation rates, explained that in 2003 the CBE governor, at that time Farouk Al-Okda, had announced that the Bank would start a strategy to cap the inflation rate but that nothing had happened.
“In developed countries, the central banks are committed to announcing a targeted inflation rate at the beginning of each year to help individuals, associations, investors and corporates set their own plans for the coming year. But this never happens in Egypt,” Al-Naqeeb said.
The bank’s expansion of the money supply had added to the problem, he said, adding that the bank had issued more than LE120 billion during the two-and-a-half years following the revolution. This had increased the supply of money, but real growth in the economy had been only between 1.5 to 2 per cent.
One further reason for the high prices was the long list of mediators between producers and consumers, Helmi said. “Each category takes a profit, leading to the final high prices paid by consumers.”
Low-income categories representing the majority of Egypt’s population often complain about high prices, but due to inflation many middle-class families are now also facing problems meeting their needs.
Noha Rami, a housewife, complained that the prices of some food stuffs had increased in an unjustified way. “Although my husband’s monthly salary is LE10,000, I have had to reduce monthly outgoings on some food stuffs because they have become very expensive. Meat currently costs more than LE90 per kilo,” she said.   
To fight the rising costs, minister of internal trade and supply Mohamed Abu Shadi inaugurated governmental outlets that offer food commodities at discounts ranging from 15 to 25 per cent earlier in December. The minister also noted that there were plans in the coming months to extend the discounted sale of vegetables, fruit and legumes to all governorates.
Moreover, in September the interim government decided to impose a price ceiling on fruit and vegetables to fight price increases by merchants. The compulsory prices vary every week and take effect on Saturdays. Inspectors have been tasked with ensuring that commodities continue to be sold at reduced prices, and they are able to provide additional quantities of commodities in case of shortages.
Penalties for those violating the set prices or committing fraud include imprisonment for periods of one to five years and fines from LE1,000 to LE5,000, according to Abu Shadi.
Food markets have been plagued by prices shifts since the 25 January Revolution. According to a report published by CAPMAS, Egyptians spend 48 per cent of their income on food. To cap the problem of inflation, Al-Naqeeb said that a comprehensive strategy to tackle the country’s economic problems in the short, medium and longer terms should be set and announced to the public.
Meanwhile, figures issued by CAPMAS showed that month-to-month inflation declined by 1.3 per cent in December, compared to November’s highest record in three years at 14.2 per cent. This reduction was due to a drop in the prices of butane gas cylinders, vegetables and fruit, particularly tomatoes, potatoes and oranges.
It was the second monthly decline in inflation during 2013, the first being in May when rates slowed by 0.2 per cent month-to-month.

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