Like it or not, Egypt has to deal with a looming global recession. Al-Ahram Weekly takes a look at the prospects for various aspects of the economy Wishful thinking? Though several basic food commodities have become cheaper internationally, Mona El-Fiqi discovers they might stay expensive locally Beans, meat, poultry, dairy products and bread are only some of the items that have seen double digit price increases over the past year. To date the hikes have been attributed to the fallout from soaring international prices. But things have changed. A global slowdown on the horizon has caused prices to drop. To maximise the only silver lining on the economic horizon, the government announced food commodities on the local market would witness a drop in prices within a week. But savvy consumers received the news with caution. In a bid to reassure the public, Minister of Trade and Industry Rachid Mohamed Rachid met with local food producers and importers to discuss the appropriate procedures needed to help the market respond to the external factors. Rachid insisted that the government would not permit unjustified increases in prices particularly for those commodities which have recently become cheaper. "The government will take all possible measures to accelerate the local market's response to the reduction of the international prices for the benefit of consumers," he said. At the same time Rachid explained that the government will not hesitate to provide support and banking facilities to national food producing companies to enable them to become more competitive, and to ease the negative impact of the banking crisis on their business. Moreover, according to the minister, the Egyptian banking system is committed to not adding any restrictions on credit procedures for local producers and importers. According to figures from the Internal Trade Department at the Ministry of Trade and Industry, the reduction in international prices led to a notable decrease in the wholesale prices of some commodities such as flour, which fell from LE3,800 to LE2,500 per tonne. Meanwhile, the price of pasta went down from LE3,600 per tonne to LE2,400, that of corn dropped from LE2,800 to LE2,400 per tonne, beans from LE4,700 to LE2,500 per tonne and rice from LE3,300 to LE2,380. The list also included white cheese, imported meat, poultry, eggs, cooking oil, imported butter and milk. Considering this, at least at the cooperatives, we should in theory be able to expect lower prices. Ahmed El-Rakaybi, chairman of the Holding Company for Food Industries, said the price of beans at the cooperatives was reduced from LE6 to LE4.5 per kilo, while pasta is sold at LE1.6 per kilo and cooking oil at LE7 per litre. During the meeting, Alaa Radwan, head of the Meat Importers Division, said the price of imported meat was down by 25 per cent, and that this would definitely show on the local market in the coming days. In the meantime, Rachid commissioned the Federation of Egyptian Chambers of Commerce to conduct an urgent investigation which would include study of the prices of basic commodities, particularly food products. The results are to be announced to the public each week in cooperation with the ministry and producers, in order to update consumers on the latest prices. But despite all these efforts, consumers do not expect prices to fall. Ali Mahmoud, a state employee, said prices will never be reduced even if international prices fall. He believes traders and importers keep the difference for themselves to maximise their own profits. "I know prices can easily be raised on the back of hikes in international prices, but they never go down again even if international prices do," he said. The reason for this, he believes, is that the government cannot actually control the local market nor impose prices as long as they are left to supply and demand. "Consumers are left to face the greed of importers and traders," Mahmoud added cynically. Nader Noureddin, professor of agriculture at Cairo University, agreed with consumers that the private sector does not respond easily to the reduction of prices since it gives priority to its profits. He added that wheat prices reached their peak to register $450 per tonne in February 2008, while it is currently traded at $200 per tonne. Noureddin noted that the price of bread has not fallen now, even though it rose when international prices did. He also said that in Jordan, the prices of food commodities and fuel have decreased by 50 per cent over the past few months in response to the reduction of international prices of oil and grains, but nothing happened in Egypt. The problem, according to Noureddin, is that the government cannot oblige the private sector to reduce prices. "The government does not have the appropriate mechanism to control the local markets. The government should exert more efforts to protect consumers," he said. He added that consumers are suffering acutely because the price of food commodities in Egypt represents between 60 and 80 per cent of an average family's total budget, as compared to 15 to 20 per cent in industrialised countries. One of the reasons for the reduction in international prices of wheat, according to Noureddin, is that when wheat prices registered record highs in 2006, farmers started to cultivate new areas with this crop. The result was an increase in the total international production of wheat from 608 million tonnes in 2006 to 647 million tonnes in 2007. And it is expected to reach 686 million tonnes in 2008. One other cause is that the International Food Conference held in May in Rome recommended that industrialised countries keep their bio-fuel production at the level of 2007 up until 2015. This led to a growth in wheat supply internationally, and a subsequent price cut. Additional reporting Sherine Nasr
