Upping interest rates FOR THE FIFTH time this year, the Central Bank of Egypt (CBE) increased its overnight interest rates, in a move aimed at curbing inflation. The CBE's Monetary Policy Committee (MPC) decided on 7 August to raise the overnight deposit and lending rates by 0.5 per cent, to reach 11 per cent and 13 per cent, respectively. A CBE news release noted that while Consumer Price Index inflation showed a modest acceleration in June 2008, reaching 20.2 as domestic food inflation was broadly unchanged, the MPC remains concerned about the possible propagation of food inflation to non- food inflation. The uncertainty surrounding the outlook for food prices worldwide, despite a decline from record levels in the past three months, remains a key upside risk to the domestic inflation outlook, according to the CBE release. On 10 August, following the decision, the government revealed that urban inflation reached 22 per cent in July 2008 -- the highest since January 1992. In the countryside, inflation rose to 24.3 per cent, up from 22.9 in May 2008, fed by a 32 per cent increase in food prices. In an obvious reference to the possibility of further increases in interest rates, the release noted that the MPC will continue to closely monitor all economic developments, "especially the factors underlying inflation, and will not hesitate to adjust key CBE rates to ensure price stability over the medium-term." Preparing for Ramadan feasts THE CONSUMER Protection Authority (CPA) has launched campaigns to control local markets before the fasting month of Ramadan. They aim to ensure that all stores and supermarkets are committed to giving customers a receipt when asked. Traders must also provide a clearly displayed list of product prices. Campaigns to control markets are an integral part of CPA duties. CPA Chairman Sayed El-Alfi believes that the presence of monitoring bodies in the market is necessary to ensure that merchants are applying regulations, and to protect consumers against fraud or unjustified increase of prices. El-Alfi added that violators will be punished by publishing their names and their brand names in the media. Moreover, the CPA will continue a study by consumer associations on the prices of basic products to find out if there is any overpricing. A recent study by the Chamber of Commerce in Alexandria found out that the prices of some products such as rice, cooking oil, butter and sugar dropped in comparison to their prices a few months earlier. The reason behind the decrease, according to the study, is the availability of these products in large quantities on the market and falling international prices of some food products such as wheat, dairy products and cooking oil. The international price of wheat plummeted from $520 per tonne in 2007, to $320 per tonne last month; the cost of cooking oil dropped by 20 per cent. Moreover, the Chamber of Commerce in Cairo held a meeting last week to discuss the readiness of merchants to provide provisions for the fasting public during Ramadan. Traders asserted that food products will be available at reasonable prices and in large quantities throughout the holy month. New energy tariff unwelcome THE GOVERNMENT applied a new energy tariff on high energy consuming factories starting 1 August, by increasing the price of natural gas by 150 per cent and electricity by 80 per cent. The move is expected to generate LE15 billion to government coffers. Prime Minister Ahmed Nazif had issued Decree 1795 for 2008 to amend the prices of natural gas and electricity used by energy-intense industries such as steel, cement, fertilisers, ceramics, glass and aluminum. The new prices apply to 40 factories which use more than 50 million kilowatts of electricity or 66 million cubic metres of natural gas, annually. While the new tariff began this month, some producers claimed their July electricity and natural gas bills were calculated according to the new tariff. The owners of some factories, such as glass and chemical products, are also complaining that the new tariff will raise final prices. Producers warned that the increase in cost will help hike already high inflation rates, which recently surpassed the 20 per cent mark. They described the decree as sudden and asked for a transitional period to give them time to readjust. Another fear is that the new pricing will not be applied accurately, and only on small- and medium-size factories. The Export Council for Chemical Industries (ECCI) received several complaints from factory owners, who asked to meet with Minister of Trade and Industry Rachid Mohamed Rachid to discuss the issue. No public investments in steel MINISTER of Trade and Industry Rachid Mohamed Rachid asserted that the government has no intention in participating in industrial investments in steel and cement projects. According to Rachid, the private sector is the engine for this industrial sector. He explained that the 14 licences issued recently by his ministry to establish new cement production lines are wholly owned by private sector investors, except for one. Al-Nahda for Industries in Qena is a public company producing 1.5 million tonnes of cement annually, with total investments of LE1.2 billion. Another five new cement factories are scheduled to begin production this year, according to Rachid. Rachid's announcement followed a statement by Minister of Investment Mahmoud Mohieddin during a visit to Upper Egypt last week, that the government is currently studying the establishment of a new steel factory in a northern governorate. The following day, a joint news release issued by both ministers asserted that the government does not intend to participate in any steel or cement factories.
