CAIRO: As Egypt works to reduce the budget deficit by cutting back on expenditures, the trade ministry is mulling raising import tariffs on “luxury, non-essential” goods.
“The ministry is studying the idea of adding more duties to luxury products such as caviar and similar items,” a media representative from the ministry told Daily News Egypt.
“However, there are not any discussions whatsoever to stop importing these products as they are still goods, which are used by many.”
He added that no official list of products has been announced as the idea is still under study.
The government is currently pushing to reduce a swelling budget deficit, currently set at LE 134 billion ($22.2 billion). Last month, officials predicted that this figure would eventually reach LE 182 billion ($30 billion) as foreign reserves also dwindle.
Foreign reserves fell by around $2 billion at the end of December to reach $18.1 billion, continuing the steady decline of about $2 billion per month since the Jan. 25 uprising that toppled former President Hosni Mubarak.
Magda Kandil, executive director of the Egyptian Center for Economic Studies, told DNE that there are fears the state would have difficulties paying for the cost of imports.
To mitigate the effects of a looming economic crisis, the Cabinet introduced last month plans to reduce fuel subsidies for energy-intensive industries and postponed a property tax, which has been repeatedly delayed.
This week, after news of austerity measures circulated, concerns rose that certain imports such as dog and cat food, caviar, ready-made garments or jumbo shrimp would be discontinued.
Alaa Ezz, secretary general of the Federation of Industries, told DNE that currently, such a move is not even possible. While there were ongoing talks to add a tax to customs, nothing has been implemented so far, Ezz added.
"We have regional commitments as well as commitments with the European Union, most of our imports are under the free trade agreement, so it is not possible to stop importing specific products now," he said.
"Rationalizing our imports was an issue being studied to reduce the declining reserves and our balance of payments. After doing their homework, officials found that the impact on savings would be minimal and such a move would hurt tourism and the image of Egypt," he added.
Egypt’s Prime Minister Kamal El-Ganzoury announced last month that the government is planning to cut expenditures by about LE 20 billion (3.3 billion).
Officials from the Cabinet convened again on Monday to discuss the future of the economy.
The committee, which included the prime minister, the ministers of trade, finance, agriculture, tourism, and petroleum, discussed how to deal with the current economic situation, the budget deficit, the balance of payments, and rationalization to curb government spending.
Ezz pointed out that products like caviar, for example, are not intended for the local market and are aimed to supply tourists visiting Egypt as well as luxury hotels.
"The majority of the use for these items is for tourism, not local consumers," he said.
He also added that most consumers who use such products are frequent travelers and that banning these goods would just encourage smuggling.
"It would be perfectly legal if people started bringing in these items in their suitcases, there is no law that bans it, so these items would be coming in and the country would be losing the revenue of the customs," he said.
Ezz also added that the government scrapped the idea because officials saw that it would "hurt the image" of Egypt as a tourism country and that the idea would do more damage than good.
"There is already lots of fright about the future of tourism in Egypt, the image of Egypt as a tourism country would be negatively impacted and the savings from banning these imports would also be minimal," he said.
When asked about a list of the goods that the new tax could apply to, he said "the term non-essential goods is already a vague term; I can confirm that no official list of these items has been drafted yet."
