CAIRO: The cold is moving in, but the chill in Egypt stems from one word: inflation. Egyptians took to the streets last weekend in Cairo, and in smaller provinces such as Tanta, protesting ongoing price hikes. "The current chaos that is happening in our markets is [unbearable], said Samir Radwan, executive director of the Egyptian National Council for Competitiveness. "The government has to monitor prices as well as intervene to put an end to [opportunistic] price increase and monopoly practices, he said, referring to the steel price dilemma. According to the Central Authority for Public Mobilization and Statistics (CAPMAS), prices of foodstuffs soared 8.6 percent in 2007. The government statistics agency said mid-January that prices of flour increased 8.27 percent, pasta by 38 percent, dairy products by 15.7 percent, poultry by 10.1 percent, cheese by 17.5 percent, cooking oil by 27.1 percent, rice by 10.2 percent, ghee by 27.3 percent, and spices by 18.2 percent. Baladi bread - an Egyptian staple - went up by 4.1 percent. Some 2,000 protestors (including members of opposition parties and the Kefaya Movement for Change) rallied after Friday's prayers to demonstrate against price upsurges (especially in essential foodstuffs as well as steel and cement). They shouted phrases such as: "Sugar went up and cooking oil went up, we will wind up selling our furniture. The Kefaya protest, in particular, witnessed some intense action, as police took Abdel Wahab El Messiri, general coordinator of Kefaya, among other colleagues and dumped them in a desert suburb. The protest was due to take place near Sayeda Zeinab Square, a somewhat populated district, however, members of the movement ended up protesting at the steps of the Press Syndicate allegedly due to heavy presence of riot police. Despite the protests, the government on Saturday increased the prices of flour and cooking oil for the second time in two weeks. Prices of flour have soared 72 percent per ton, while cooking oil soared to around LE 1.5 per liter. The price upsurges also affected sugar, which now cost LE 2.75-3 per kilo. Muddying the water was the government's recent decision to increase prices of mazut (fuel oil) a 100 percent - from LE 500 to LE 1,000 per ton - which consequently elevated prices of sectors that rely on fuel oil for production. Among these were building materials, sugar and paper. The most recent sector added to that list was ginning, whereby some five companies agreed to increase their ginning fees by 21.7 percent, equivalent to LE 5 per qintar, to reach LE 28 per qintar. Ginning fees have remained unchanged for the past five years, and the companies cited the upsurge in mazut as a key reason. As the mazut price hike triggered public turmoil, sources at the Ministry of Finance stated that mazut subsidies had to be removed because they were a burden on the public budget. Subsidies on mazut were LE 6 billion, out of a total of LE 36 billion on petroleum products in the current fiscal year, and were expected to rise to LE 8 billion with the increase in international mazut prices to over $400 per ton. The ministry added that savings from the mazut price increase were expected to reach LE 4 billion in the current fiscal year 2007/2008. Rumors of a parallel hike in prices of gasoline loomed on the horizon, which sparked further public commotion in fear of a sudden acceleration of the inflation rate from its current 6-8 percent level. Consequently, President Hosni Mubarak was quoted in the national press as saying that he issued strict instructions to the government to prevent increasing prices of petroleum products. The president reportedly said that the recent increase in the mazut prices were sufficient for now. "While we believe that the public reaction to the hike in fuel oil price could delay implementation of another round of price hikes in other energy products, especially diesel (gas oil) and gasoline, we expect the delay would be from first quarter of 2008 to the end of the second quarter, said Beltone Financial. "We believe the government is committed to raising energy prices - on an annual basis - to redirect subsidies from the higher income population to the lower income population and reduce the gap between the products actual cost and market prices and their domestic sale price. According to state figure, total subsidies are expected to reach LE 64 billion in fiscal year 2007/08, with over LE 40 billion projected to be spent on energy products. Government studies show that lower-income brackets received only 40 percent of government subsidies, while 60 percent of subsidies benefited higher-income groups. While about 45 percent of the population survives on just $2 a day, the chill will linger as the average Egyptian works to make ends meet. If the government decides to raise prices of gasoline, it will likely fuel inflationary pressure and elevate prices of commodities on the market, similar to what happened in the summer of 2006.
