The drop in the value of the pound and its purchasing power has brought on fears of a recession. Mona El Fiqi reports Have you gone shopping in the past two weeks? If so, you must have noticed an increase in almost all prices, of both local and imported products, including basic food commodities, home appliances, vehicles, furniture and services. Basic food items have increased in price by 10 to 20 per cent. Imported butter has gone up from LE8.5 to LE12 per kilo, flour from LE0.9 to LE1.1 per kilo and rice from LE1.7 to LE2 per kilo. Although the value of the pound has fallen by over 20 per cent, buyers feel that increases are not justified so soon after the change in the foreign exchange (forex) regime. "Traders have used the new regime as a pretext for raising prices," said El-Sayed Abdeen, chairman of the Grocery Division at the Federation of Egyptian Chambers of Commerce. Abdeen explained that traders have taken advantage of the new system and changed the prices of goods which were already in stock. "When I decided to buy a small car for my son, though it had been on sale for six months, the trader raised its price by 40 per cent after the floatation of the pound," said Essameddin Galal, chairman of the National Society for Technology and Economic Development. "A trader should not forget that, although he trades one product, he is a consumer of a lot of other products," Galal added. The new forex regime has had a negative impact on consumers, especially government employees whose wages have not been raised in line with price increases. "Since the floating of the pound I need LE5 to buy a product which I used to get for LE2," said Ahmed Mahmoud, a government employee. Moreover, consumers who depend on interest they receive from their savings have lost a portion of their annual income as interest rates on deposits dropped from 9.2 per cent to eight per cent. To soften the blow of these price rises, Prime Minister Atef Ebeid has announced that the government is considering subsidising basic commodities. Economists have also recommended the government subsidise basic commodities such as sugar, flour, rice and cooking oil for low income individuals. In a similar vein, Galal argues that markets will remain unstable unless the government intervenes. For example, government cooperatives should be used to provide basic food commodities for middle and low-income families and to control market prices. Moreover, ration cards, used by middle and low-income families to purchase basic food commodities at subsidised prices, should be another government tool to protect consumers from the greed of traders, Galal said. Of late, the use of ration cards has been limited to very low income individuals. Commodities provided by these cards have gradually been decreased and it is no longer permitted to register new born children with these cards. "In addition, the procedures people have to go through to acquire a ration card, have led the majority to do without them," Galal added. While the government subsidises basic foods, it cannot subsidise basic inputs for manufacturers, particularly if they are imported. According to one employee of a multinational pharmaceutical company operating in Egypt who preferred to remain anonymous, 93 per cent of locally manufactured pharmaceutical products use imported raw materials. "This would require prices be adjusted as well," he said. The furniture industry will also suffer. "This industry depends completely on imported wood," said Mounir Ragheb, chairman of the wood division at the Federation of Egyptian Chambers of Commerce. As a result, furniture prices have increased by 15 per cent. "Many deals have been cancelled since consumers are unable to afford the new high prices," Ragheb added. Given the current instability of prices, non- governmental organisations have also decided to play a role. Fathi Helal, chairman of the Consumer Protection Society in Giza, said that his members have started to hold periodical meetings with consumers to increase awareness of their rights. "They should not let traders take advantage of them," Helal said. The society also met with traders in an attempt to convince them not to take advantage of the situation. Increases in prices, which might lead individuals to abstain from buying have also raised fears of a recession. Mohamed El-Swedi, chairman of the Arab Industrial and International Trading Company for electric equipment has warned that soaring prices will lead to a recession, which will not be easy for the economy to overcome.