By Fatima El-Saadani
In Egypt, the price of staple foods is always a hot topic, and the government is constantly under attack for poor food quality and rising prices. When Prime Minister Ahmed Nazif addressed Parliament on December 30, 2007, he staunchly defended his cabinet’s policies and proudly pointed to its achievements. But he also admitted Egypt’s poor had not felt all the benefits of the nation’s economic growth. He explained that it was due to the integration of the Egyptian economy into the global economy, and now Egyptians are feeling the effect of rising global food prices.
Now, if you’ve read The Economist’s December 8-14 issue on the end of ‘cheap food’; you know food prices have gone up and they’re not coming down. Why? There are several reasons.
The trend has been developing for a while. In September 2006, Business Today Egypt reported a 77% increase in sugar prices in less than a year (from May 2005 to February 2006), citing China’s population explosion, climate changes in Thailand and limited cultivated land in Australia as reasons for supply shortages. The largest contributor to the sugar shortage has been (and still is) the world’s largest sugar producer: Brazil. The world’s fifth-most-populous country has opted to use the sweet stuff to create ethanol — an alternative source of energy — to replace oil and soften the impact of spiraling oil prices on its economy.
It’s not just the sugar prices that are rising, and it’s not just happening in Egypt. Saudi Arabian authorities are negotiating with local dairy producers to bring fresh milk prices down after they spiked 20% on January 3. Officials accepted, but food prices are still expected to rise 20-30% this year.
Back in Egypt, Ali El-Moselhi, the Minister of Social Solidarity rebutted accusations about the rising prices and deteriorating quality of bread.
It’s an age-old debate: Do government policies simply benefit the rich and hurt the poor?
The latest report issued by the United Nation’s Food and Agriculture Organization (FAO) shows an estimated 5% year-over-year increase in global expenditure on imported foodstuffs to more than $400 billion (LE 2.2 trillion) in 2007. The highest increase is in the price of imported coarse grains and vegetable oils, which are also used in biofuel production.
In Egypt, the prices of several food products have also been on the rise. Rice — the export of which has now been banned — has increased 10.2% year-over-year in November 2007 and wheat flour prices went up 27.8% over the year.
As a result of these measures the country has seen a 30% increase in petrol prices and consequent increases in commodity prices. So, what’s the state up against in the next year in terms of food price?
Globally, prices for a variety of grains have risen throughout 2007 because oil prices rallied to more than $100 per barrel. In turn, governments have become more concerned with food security and alternative energy sources. It also stems from investment funds turning to commodity markets amid global geopolitical tensions and a weakening dollar, which has made dollar-backed commodities an attractive investment.There couldn’t have been a worse time for Egypt to experience this economic growth, which is driving demand-inflation –– while global food prices are on the rise, exporters prefer to make an extra buck selling agricultural produce abroad rather than at home. And as the government is trying to appease the poor and bring down its budget deficit, it is a balancing act indeed.
| Annual Percent Change in Prices of Select Commodities |
| Nov-06 | Sep-07 | Oct-07 | Nov-07 |
| Rice | 27.3 | 21.1 | 21.1 | 10.2 |
| Wheat flour | 0.0 | 20.2 | 20.2 | 27.8 |
| Macaroni | 4.1 | 28.4 | 40.0 | 38.0 |
| Fresh Meat | 14.3 | 4.8 | 3.2 | 1.2 |
| Milk | 7.7 | 7.9 | 7.9 | 7.9 |
| Cheese | 4.5 | 12.0 | 13.7 | 17.4 |
| Eggs | 62.6 | -4.0 | -26.3 | 1.0 |
| Tomatoes | 22.4 | 84.1 | 13.7 | -31.1 |
| Potatoes | 48.6 | 50.8 | 48.7 | 41.8 |
| Onions | 120.2 | 2.2 | -3.6 | 7.0 |
| Beans | 11.5 | 15.1 | 16.6 | 11.2 |
| Lentils | 2.3 | 9.0 | 17.3 | 16.2 |
| Sugar | 20.0 | 0.0 | 0.0 | 0.0 |
| Tea | 0.0 | 0.0 | 0.0 | 0.0 |
| Coffee | 3.4 | 8.3 | 8.3 | 8.3 |
| Soft Drinks | 0.0 | 7.9 | 7.9 | 7.9 |
| Cigarettes | 7.7 | 0.0 | 0.0 | 0.0 |
| HouseholdAppliances | 8.7 | 3.4 | 3.4 | 3.4 |
Source: Ministry of Finance December 2007 Economic Report
Business Today - Egypt
