Wednesday,15 August, 2018
Current issue | Issue 1195, (1-7 May 2014)
Wednesday,15 August, 2018
Issue 1195, (1-7 May 2014)

Ahram Weekly

Fuelling food inflation

Al-Ahram Weekly

Plans to restructure fuel subsidies will likely eventually lead to hikes in food prices, according to Ali Abdel-Rahman, a professor of economics at the Agriculture Research Centre, who told Al-Ahram Weekly that the reduction in fuel subsidies would push food prices up by five times their current level.

He explained that this hefty increase would be due to steps from collecting the harvest to transporting food products from villages to the markets being factored into the end price and reflecting the increased price of fuel.

“Farmers, traders and transportation companies will simply increase costs by a percentage even higher than the amount of the rise in fuel prices. This will be shouldered by end consumers,” he said.

Samiha Ahmed, a housewife and the mother of three children, complained that before the 25 January Revolution increases in food prices used to happen once a year, usually after employees’ bonuses in July or following a hike in the dollar exchange rate. But “now prices are out of control,” she said, adding that the prices of basic commodities such as vegetables, fruit, cooking oil, beans, rice, sugar, meat and chicken had almost doubled over the last two years.

“Last week, the price of milk and other dairy products increased by 10 per cent,” she said.

Abdel-Rahman attributed the increases to the lack of control of local markets by the government, meaning that wholesalers and traders had felt free to raise prices.

Experts believe that NGOs should play a greater role in helping to control prices. “In each district an organisation should be formed to supervise traders in the markets. In addition to its role in controlling the markets, the government should also help by providing high-quality products at low prices through its cooperative outlets,” Abdel-Rahman explained.

The government was not following a coherent policy on subsidies, he said. “The government is always talking about reducing or canceling the subsidies, claiming that this would be the best solution for the state’s budget deficit,” he added.

The inflation rate in March 2014 was 9.2 per cent, according to Central Bank of Egypt (CBE) figures. Business Barometer, issued by the Egyptian Centre for Economic Studies (ECES), attributed the increases to three reasons.

The rise in the prices of fruit and vegetables was due to an increase in demand against supply, which has been reduced as a result of higher transportation and insurance prices. The pound had also lost value against the dollar, meaning higher bills for imports, and the monetary policies of the CBE aimed at stabilising interest rates had led to increased prices.

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