As inflation rears its ugly head, the government is struggling to appease angry consumers while continuing with liberalisation policies. Mona El-Fiqi reports Since the floatation of the Egyptian pound in January, consumers have faced a nonstop increase in their expenses for food, clothes and other essential goods. Although the government has taken several measures in recent months to control the market and slow the spiralling of prices, consumers can still see the effects of inflation almost on a daily basis. Concurrent with the return of millions of students to schools and universities, this month's price hikes have created an especially difficult burden for Egyptian families. "Due to the increase in prices, I could not afford to buy new school uniforms for my children, so they will have to go to school wearing the old ones," said a mother of three. Consumers interviewed by Al-Ahram Weekly complained that their incomes have not been adjusted to cope with the inflated prices and allow them to maintain their prior standard of living. "How can I manage my family's budget?" asked Ali Hassan, a teacher at a government school. "Since last January, prices have been going up and up, doubling in some goods, while my salary was raised by only 10 per cent in July." The price increases were triggered last January by the floatation and subsequent devaluation of the Egyptian pound. With the food and consumer goods market, including bread and medicine, reliant on large-scale importation, the devaluation of the pound was translated almost overnight into higher prices. As the value of the pound has steadily fallen against other major currencies since then, prices have been pushed upwards. El-Sayed Abdeen, chairman of the grocery division at the Egyptian Federation for Chambers of Commerce defended wholesalers and traders, arguing that they are not to be blamed for the price hikes. He explained that the exchange rate has made goods more expensive, with the difference paid for by the consumers, while traders on their part are recording fewer sales. Consumers have been adapting to the discrepancy between their incomes and their bills by simply buying less. Inflation, especially in consumer goods, was at the top of the government's agenda last week, as it instituted a series of measures to slow down the vicious cycle. Prime Minister Atef Ebeid said the government would make available the foreign currency needed to guarantee the subsidies of essential goods. Ebeid announced that LE1.4 billion would be provided as additional credit to maintain supplies of staples such as wheat, cooking oil, sugar, beans, rice and tea. Moreover, Hassan Khedr, minister of supply and internal trade announced that LE250 million will be made available for immediate payment to rice farmers who will deliver their harvest to the mills. Khedr said the rice harvest is expected to reach five million tonnes, a 20 per cent increase on last year's harvest. President Mubarak held two ministerial meetings within 72 hours to follow up the government's handling of the problem. The prices problem was compounded by reports of bread shortages in some areas. The price of white sandwich bread, very much in demand with the onset of the school year, went up by 10 per cent. Echoing the government's optimistic view, the governors of both Cairo and Giza promised that bread will be made available at more reasonable prices by the end of this week. During the ministerial meeting, President Mubarak gave instructions to authorities to monitor the market and ensure the availability of food. Admitting that the government cannot set fixed prices for goods, but has to let the markets run according to supply and demand, experts said that the government should use its outlets (Gam'iyya) and ration cards to provide the main staples at reduced prices to balance the markets. Khaled Hamza, the chairman of the imports and customs committee at the Egyptian Businessmen Association, said that the government should take emergency measures to face the problem, which he classified as "very serious". Hamza attributed the price increases of food to the liberalisation of agriculture -- the government is no longer responsible for purchasing the harvest of strategic crops from farmers. This gives farmers the option of hoarding the harvest in order to sell it at higher prices. According to Hamza, the government did not adequately prepare itself to handle inflation before deciding to float the pound.
