A plan by Egypt’s President Abdel Fattah al-Sisi to bring down runaway commodity prices is seen by a wide section of the public as one last attempt to help the poor put food on the table but some economists fear it could scare investors away.
Sisi said Cairo would intervene to prevent commodity prices rising even more in the local markets, vowing to bring the prices down quickly. The government will sell basic commodities at more than 4,000 state-run supermarkets below market prices. It also has coordinated campaigns by the Interior Ministry and the Ministry of Supply to crack down on traders who increase prices.
Most importantly, the army, which acts as an autonomous agricultural and industrial production entity, producing everything from macaroni to cooking machines, will sell vegetables, cooking oils, meat, chicken and butter at reduced prices. The plan has been warmly welcomed by the public but economists say the scheme could scare investors away and introduce unfair competition into the market.
Shereen al-Shawarbi, an economics professor at Cairo University, said Egypt needs to attract investment. “If the government offers these commodities at these low prices, the private sector could run away because it will not be able to stand the competition,” Shawarbi said.
Other economists counter that the government should protect the poor. “The government has the right to take measures to protect the poor in society,” economist Bassant Fahmi said. “These measures will, at the end of the day, coerce greedy traders to reduce their profit margins because they will not stand competition with the government, which has strong economic means to tame uncontrollable prices.”
In the past two years, most commodities in Egyptian markets rose 30-60%, according to economists. A kilogram of tomatoes rose from about 7 US cents two years ago to around 13 cents now. A kilogram of beef rose from $7.50 in 2013 to more than $10 now. Most commodities had similar price increases. Egypt’s annual inflation rate was 9% in September. Some 2% lower than the September 2014 rate, the drop was not felt by the majority of Egyptians.
Rising commodity prices are threatening to translate into political unrest with activists, including those at the forefront of the 2011 uprising, calling for another revolution in January 2016. Observers have linked Sisi’s initiative to lower commodity prices to those movements.
The success of the president’s campaign is still not certain. One of the challenges for the government will be to have its cheap commodities programme reach areas where most of the poor live. State-run supermarkets and army vehicles selling meat and vegetables at reduced prices can be found in urban centres but it is not known whether the same opportunities are available to Egyptians living in other areas of the country.
How long the state can offer commodities at reduced prices to the public is another question given that Egypt has plans to slash commodity and fuel subsidies in a desperate bid to bridge a growing budget deficit.
Yumn al-Hamaqi, an economics professor from Cairo University, said Sisi’s plan could succeed in lowering commodity prices if the government can deliver cheap commodities to all poorer Egyptians, including those living in the countryside and city slums. “This is the real challenge, in fact,” Hamaqi said. “If the government fails in making these cheap commodities available to the poor everywhere, we will then be talking about a campaign that is present in the media while the majority of the public will continue to suffer.”
This article by Amr Emam originally appeared in The Arab Weekly