CAIRO: With the holy month of Ramadan comes the yearly debate about how Egyptians’ food consumption rises exponentially during a religious month of fasting, self control and charity. It also pushes economists to try to curb the resulting inflation and its impact on the economy.
Former Minister of Economy and Trade Sultan Abu Ali told Daily News Egypt that the increase in consumption and the subsequent increase in prices and inflation are unjustifiable from a cultural/religious perspective and an institutional/economic point of view.
“On the institutional level, traders and wholesalers are taking advantage of higher demand during the month by raising their prices and are able to do so due to lax regulation and stabilization efforts of markets by the authorities,” said Abu Ali.
Abu Ali explained that the government’s neoliberal stance prioritizes the freedom of private sector companies and shops to take advantage of rising demand as consumer protection takes a back seat, but admitted that consumers are also at fault for their overindulgence from a religious and moral perspective.
He added that on the household level, charity efforts that usually accompany the month do not justify the increase in household consumption, as the amount of food given back to the poor through charitable donations does not outweigh the negative effects of inflationary pressure on their purchasing power.
“The government should take emergency measures to stabilize all prices during the month and maintain strong regulations to restrict overpricing in both public and private sectors,” Abu Ali said.
The Egyptian government has already been taking precautions to relieve the inflationary pressure caused by the excess consumption of food products in Ramadan.
In a meeting last Tuesday with the president of the Federation of Egypt Chambers of Commerce, Ahmed Al-Wakeel, Prime Minister Ahmed Nazif stressed the importance of the commerce chambers in achieving market stability, and providing affordable goods with required standards aiming at protecting consumer rights.
Al-Wakeel said that all provisions were taken for products that are traditionally consumed during the month and insured that chambers of commerce will provide these goods without any overpricing violations.
The state-run daily Al-Ahram reported early in July that the government is going to increase the supply of meat, poultry, fish, oils, rice and beans in order to keep prices low during Ramadan.
Other measures are being taken to relieve inflationary pressure include setting up outlets that provide goods at prices 20 percent lower than their market price, increasing the quota of butane gas by 25 percent, and increasing the quotas of subsidized flour to bakeries.
As for the government’s monetary policy, in a meeting held last week, the Monetary Policy Committee (MPC) at the Central Bank of Egypt (CBE) decided to keep the rates unchanged at the current levels of 9.75 percent and 8.25 percent for the overnight lending and deposit rates, respectively.
Beltone Financial expects inflation rates to rise, partly due to the consumption of food products during the month.
“The rise that we expect to occur in the monthly change of headline inflation in the coming summer months will be mainly a result of one-off factors (including higher energy prices for non-energy intensive industries, higher sales tax on cigarettes and building materials and seasonal factors including Ramadan,” said Beltone in a statement.
They expect inflation to average 13 percent in 2010, up from 12 percent in 2009.
Recent concerns about rising meat and poultry prices, which have sparked opposition from consumer protection groups involving consumer boycotts and strikes, may intensify as prices of meat and poultry are already rising in anticipation of the ensuing demand.
The official news portal Egynews.net reported a hike in meat prices in different governorates; prices went from LE 52 to 55 per kilogram, amid expectations that it will further rise to LE 60.
The website added that the price of poultry has also reached the “unprecedented” LE 20 per kilogram of live poultry from LE 13.5. Farm owners cited increased demand and higher feedstock prices as the reason for this hike.
The government announced new prices for food commodities to be sold during Ramadan at state-subsidized supply outlets, which have been supplied with 47,000 tons of sugar and 3500 tons of rice.
Sugar will be sold for LE 3.75 per kilogram; rice for LE 3.25; flour for LE 2.50; cooking oil for LE 5.60; beans for LE 3.25; and lentils for LE 8.50.
Meanwhile, John Salevurakis, economics professor at the American University in Cairo, examined whether the increase in demand would have a positive effect on the economy.
“Food prices are likely to rise as a result of Ramadan demand and Egypt has already witnessed dramatic food price increases over recent years,” Salevurakis said. “Given the reality that those price increases have not corrected due to the global crisis, it seems counterproductive to assert that rising demand for food products might be remotely good for an economy,” he added.
Salevurakis comments that it appears somewhat contradictory that a month dedicated to fasting actually results in higher levels of consumption in the aggregate. “This is not a unique phenomenon, of course, and is quite common elsewhere in the world.”
“The common nature of the phenomenon however, should not conceal the reality that such overconsumption might have an economically negative impact upon those who are traditionally recipients of charity during Ramadan,” Salevurakis asserted.
Salevurakis concluded that the government’s announced precautions were necessary to address the issue.
“I think the government is acting in a manner appropriate to the reality that the market will not rationally adjust in anticipation of increasing demand,” he said.
Abu Ali stressed that consumers are supposed to act rationally and refrain from overindulgence and glut, and that retailers and wholesalers, specifically of food products, should not take advantage of consumers by overpricing their products.
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Live poultry prices have risen from LE 13.5 to LE 20 per kilogram, according to government figures. (AFP Photo/Crish Bouroncle)
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