Sunday,22 July, 2018
Current issue | Issue 1203, (26 June - 2 July 2014)
Sunday,22 July, 2018
Issue 1203, (26 June - 2 July 2014)

Ahram Weekly

Making ends meet

Demand for food and electricity will peak during Ramadan, foregrounding the government’s ability to meet the needs of an ever growing population, writes Sherine Abdel-Razek

Al-Ahram Weekly

Demand for food products famously increases during Ramadan — which this year starts on  Saturday or Sunday — as families gather throughout the month to break the fast.

A survey conducted by Visa International found that Egyptians spend 50 per cent more during Ramadan than at any other time of the year. The increase in demand for food commodities, including meat, is around 25-30 per cent, says former minister of supply Mohamed Abu Shadi, and “this is usually accompanied by an increase in prices even in state-controlled retailers”.  

This year any Ramadan-related prices hikes will come on top of soaring prices. According to Central Bank of Egypt’s statistics food inflation has been running at 15.5 per cent during the first five months of the year. In a country where poverty and overall inflation rates stand at 26 per cent 13.4 per cent respectively the holy month can come as an intolerable burden on many family budgets.

This year, though, after the state-owned Holding Company for Food industries was removed from the Ministry of Investment and affiliated to the Ministry of Supply, seasonal price hikes will be limited, says Abu Shadi.

The government’s three largest retailers, Al-Nil, Al-Ahram and Alexandria, and two major wholesalers, are now under the direct supervision of the Ministry of Supply.  

“This will allow the ministry to manage the supply and prices of goods produced and distributed by state owned companies far more effectively, explains Abu Shadi.

In addition, the ministry organised fairs in 10 governorates at which discounted goods are offered for sale to the public. The largest — ‘Welcome Ramadan’ — is held at the international exhibition grounds in Nasr City. Food and non-food commodities are sold at discounts of up to 40 per cent, while discounts of between 15 and 30 per cent will be available at the three largest government retailers.  Shoppers interviewed by Al-Ahram Weekly at one Ramadan fair said that prices appeared to be under control this year except for imported dried fruits and nuts, ingredients of the traditional Ramadan yameesh.

Traders cite the conflict in Syria — a traditional exporter of yameesh — and the higher tariffs imposed two years ago on non-basic food imports, as the reason for the surge the price of dried fruits and nuts.

Moves to seize the assets and close hundreds of Islamic charitable associations suspected of helping finance the now banned Muslim Brotherhood could also spell a bleak Ramadan for Egypt’s poorest.

Both Gamiya Shariya and Ansar Al-Sunna Al-Mohamadiyya — once the backbone of Egypt’s Islamic social service network and a major source of food and money in poor areas during Ramadan — have both been targeted.

Sayed Ali — not his real name — who manages an Islamic charity in a small village in the governorate of Minya, says the negative publicity such associations have received means the public is reluctant to make donations at a time when the government’s seizure of the assets of wealthy traders with Islamist sympathies cut off what was once the main support of Ali’s charity.

“Our funds for feeding poor people during Ramadan have fallen 55 per cent. Last year I had enough money to feed 350 families in the village. Now it will be a stretch to provide for 100,” says Ali.

Electricity consumption, like that of food, soars during Ramadan, particularly when the Holy Month falls in the hottest summer months.

During Ramadan the peak hours of electricity consumption double,” Hafez Al-Salmawi, Director of the Egyptian Electric Utility and Regulatory Agency, told the Weekly. “Usual summer peak hours start at sunset and extend for two or three hours. In Ramadan peak hours start at sunset and last until 1 am.”

Already some areas are suffering from daily black-outs lasting anything up to five hours as power stations struggle to obtain the fuel needed to generate enough power to meet demand. Last month the government took the unprecedented step of asking mosques to turn off lights and air-conditioning units in a bid to ease consumption.

Routine maintenance of generators, says Al-Salmawi, has already been rescheduled until after Ramadan to prevent any unnecessary interruption in supply.

Such moves — while they may offer a modicum of short term relief — do nothing to dent Egypt’s huge fiscal gap.

Meeting the needs of the growing population and at the same time tackling the budget deficit without resorting to socially divisive measures, is the major challenge facing President Abdel-Fattah Al-Sisi.

In a brief speech at a military graduation ceremony on Tuesday, Al-Sisi said he had refused to sign off on a 2014/15 budget proposal after long discussions he had with the cabinet because of the huge deficit it contained, to be financed by further borrowing. “We said we would revise this budget because I cannot bear to accept it when it contains this level of deficit. “I want to think of the children that are coming and to leave them something good, but this way we will leave them nothing. If the debt keeps accumulating like this, we will not leave them anything good.” The remarks were seen by many analysts as paving the way for the introduction of austerity measures, on the top of which will be cuts in the subsidy budget.

In an attempt to encourage Egyptians to make sacrifices to support the national economy Al-Sisi pledged to donate half of his LE42,000 monthly salary, and half of the property he inherited from his father “for the sake of our country”.

An hour later the Central Bank of Egypt opened an account to receive donations to back the ailing economy from inside and outside Egypt.

Energy must count among the government’s greatest headaches. Demand has been steadily increasing but the government can neither afford the fuel to generate more, nor continue to subsidise power at current rates. Energy subsidies currently eat 20 per cent of the state budget.

The budget for the new fiscal year, starting 1 July, envisages a 22 per cent cut to subsidies. Long a demand of international lending institutions, Arab countries — led by the UAE — are now pushing for a radical overhaul of state subsidies in Egypt.

The UAE has employed consultants from two investment banks to advise it on the management of its aid to Egypt, and to suggest development strategies for the Egyptian economy.

The UAE, together with Saudi Arabia and Kuwait, has offered Egypt more than $20 billion in aid since the ouster of Mohamed Morsi.

Egypt badly needs Gulf money, says Khaled Amin, professor of economics at the American University in Cairo. Funds from international organisations like the IMF, or even from USAID, are unlikely to be forthcoming given that they are linked to human rights records and weighted with political criteria. But the wave of Gulf aid, promised following Al-Sisi’s inauguration as president, is far more organised than the money pumped into Egypt following the ouster of Mohamed Morsi.

“Now it targets specific sectors or projects with the aim of developing the economy and not only giving it temporary support,” says Amin.

There is also a push to encourage Gulf-based private companies to invest in Egypt. Saudi Arabia’s Al-Marai, the Gulf’s largest dairy company, earlier this week announced plans to invest $345 million in Egypt over five years.

The amount of Gulf aid Egypt receives following the pending donor conference is likely to determine the pace and depth of subsidy reform, says Amin.

“If it is enough to help the government finance gas purchases without cutting subsidies, a move that could result in social unrest, cuts in energy subsidies will be postponed.”

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