Can the new cabinet help pull limited income families out of their perpetual cash crunch, Mona El-Fiqi asks Ali Mahmoud, a government employee, has tried in vain to balance his family budget for the past two years. Hit with price increases virtually every month, Mahmoud, who earns LE500 a month, juggles the needs of his five-member family by buying only priority items. Mahmoud's last hope of pulling out of this crisis is for Prime Minister Ahmed Nazif's cabinet to find an answer to his problems. "I hope that the new cabinet lives up to their promises and finds a quick solution for the price problem," Mahmoud said. Since its appointment two weeks ago, the new cabinet has announced that controlling prices is its top priority. Prime Minister Ahmed Nazif asserted that the main aim of the new government is to help low income citizens. Last week, the new government started implementing its programme to achieve economic and social stability through six new sub-ministerial committees, recently formed by the cabinet. Prime Minister Ahmed Nazif met with the minister of supply and internal trade, Hassen Khedr, to discuss new programmes to achieve economic and social stability through price controls. Observers have criticised the retention of Khedr as a minister in the new cabinet due to a five year track record characterised by continuously increasing prices, a shortage of basic foodstuffs and a return of the infamous bread queues. During the meeting Nazif discussed arrangements to restructure subsidies and to control prices at the markets through computerising the system of ration cards, in addition to monitoring markets and improving services to provide bread and other basic goods. Hamdi Abdel-Azeem, professor of economics and president of Sadat Academy for Administrative Sciences, explained that issuing the anti-monopoly law and the consumer protection law was an important step towards regulating the market and controling prices. "The government's role of market supervisor should continue to guarantee an adequate quantity of high-quality products and that traders do not raise prices indirectly," Abdel-Azeem said. Moreover, Abdel-Azeem argued that the ration cards system should be changed so that it can better benefit low income citizens. Abdel-Azeem explained that according to the current system, the Ministry of Supply and Internal Trade is providing a limited quota of nine basic food commodities at subsidised prices to every citizen who has a ration card. Remaining goods are left to the traders who will probably sell them on the black market. Abdel-Azeem suggested that the ration cards system should include a certain amount of money instead of a quota, so that citizens are allowed to choose among the nine commodities. For example a citizen could pick two packets of rice instead of having to take one rice and one macaroni. Moreover, according to Abdel-Azeem, when the international prices of some basic food products increase, the government should cancel the customs duties on its imports until the prices go down so that the final price of food commodities would remain low. Though experts and consumers are hopeful that the government can play a more positive role controling prices, businessmen are sceptical about the effectiveness of this role. Safwan Thabet, chairman of the chamber of food industries at the Federation of Egyptian Industries, said that since the application of supply and demand policy to the markets in the early 1990s, the government's role to control prices has become very limited, particularly since Egypt depends on imports in many sectors. "The government can do nothing to control prices, which are determined according to different factors such as the exchange rate of foreign currencies and international food prices," Thabet said. The real problem according to Thabet is that Egypt is too reliant on imports of many food commodities. For example, Egypt imports 50 per cent of its total consumption of sugar. The international sugar price, recently raised from LE1.6 to LE2.2 per kilo at both governmental cooperatives and private supermarkets, has had a negative impact on the consumer. Moreover, Thabet said that the exchange rate of foreign currencies is a very important factor that determines the final price of a product. Thabet explained that it is not only the dollar that has an impact on prices but also the euro, since 55 per cent of Egypt's imports are from European countries. However, due to the stability of the dollar exchange rate and its high availability during the past few months, the average increase of prices during 2004 on food commodities ranged between three and seven per cent, which is a reasonable average compared to last year's increase which reached 50 per cent on some goods. According to Thabet the best way to control prices is for Egypt to reduce imports and depend more on local products and materials.
