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Egypt Food and Drink Report Q3 2008Published by: Business Monitor International Published: Jul. 21, 2008 - 50 Pages Table of Contents
AbstractFood price inflation is continuing to plague Egypt, with concern over these issues growing on a dailybasis, as discussed in BMI’s recently published Egypt Food & Drink Report for Q308. With thegovernment facing protests from thousands of its citizens, there has been strong pressure to take actionagainst soaring food costs. In fact, the sharp rise in economic unrest will be uncomfortably reminiscent ofthe 1977 bread riots, in which at least 70 people died, after the government tried to reduce subsidies.In March the government made the decision to suspend rice exports for six months in an attempt toprevent the price of yet another basic food staple from rising further. Egypt produces around 4.5mntonnes of rice annually, of which 3.5mn is allocated to the domestic market. It was due to have exportedbetween 300,000 and 400,000 tonnes over the six-month period, which will instead be kept in thedomestic market. President Mubarak then ordered the army to help produce more subsidised bread, withthe army and government together opening 10 new bakeries in Cairo to produce cheap bread, along with500 kiosks to distribute this bread and cut queues. The government has also been ordered by Mubarak touse foreign currency reserves to purchase addition wheat on the international market. In addition, thegovernment will add 15mn new citizens to the list of those eligible to receive subsidised cooking oil,sugar and rice, which, along with other new policies, will raise the annual bill for food subsidies byUS$3.1bn to a total of US$13.7bn for this year.Then in April the government decided to remove tariffs on certain basic food products in the face of themounting protests. While virtually all Middle Eastern governments have been dealing with inflation,many of the smaller, richer Gulf States have attempted to offset this by raising government salaries, apolicy which could have the effect of further fuelling inflation. However, in countries such as Egypt,which are far bigger and where a large percentage of the population live in poverty, this is not a viableoption. 'We cannot afford to increase the salaries for our people like the rich countries are doing in theGulf and we cannot deal with it like in the west' said trade and industry minister Rachid Mohamed Rachidin an interview with the Financial Times. This social and political unrest has led to us dropping the country’s political risk rating. Since thegovernment will likely be forced to change economic and fiscal policies in response to public pressure, ithas lost points in the policy formation category, while the rise in inflation to 14.4% year-on-year (y-o-y,March) has triggered an automatic downward revision in the social stability category. Clearly, despite thestrong desire to cut back on food subsidies, given the current rate of food price inflation, it is impossiblefor the government to do so without suffering a major political backlash, something that it is unlikely torisk given the current climate. Get Full Details About This Report >> |
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