Cooling grocery costs

Amira Hisham, Wednesday 15 May 2024

Cheaper food and commodity prices are helping to cool inflation in Egypt.

Cooling grocery costs


Egypt’s annual headline inflation for April 2024 stood at 32.5 per cent, compared to 33.3 per cent the month before. Although still high compared to the 30.6 per cent in April 2023, it is much lower than its peak of 38 per cent in September 2023.

The downtick in inflation last month came on the back of easing food and beverage prices, which slowed to 40.5 per cent year-on-year in April, their slowest pace since late 2022, said UK based research house Capital Economics.

To ease prices further, the Ministry of Supply and Internal Trade announced price reductions on all food commodities sold in government consumer cooperatives. Meat, food oil, and sugar are currently available without restriction on quantity in 1,300 consumer cooperative outlets nationwide at a 30 per cent discount compared to their prices in supermarket chains and other local commercial markets.

The Federation of Chambers of Commerce (FEDCOC) also announced a 23 per cent reduction in the price of rice to around LE27 per kg, down from the current LE35, and a 10 to 23 per cent reduction in pasta prices, made possible by the decline in the price of wheat.

Flour prices have fallen considerably from LE18,000 a ton to LE16,000. This will soon be reflected in the price of local bread, according to the General Bakeries Division of the FEDCOC.

Various government measures have enabled the price reductions, among them the decision to liberalise the exchange rate, a first step towards enabling the release of goods and commodities that had been held up at customs.

Once the goods were released, becoming available for production needs to meet local consumer demand, Prime Minister Mustafa Madbouli met with major food producers, manufacturers, and the importers of a broad range of basic foodstuffs including sugar, rice, wheat, flour, pasta, cheese, ghee, butter, meat, and cooking oil.

He also met with representatives of the major supermarket chains, who account for over 70 per cent of the local market. The purpose of the meetings was to promote cooperation with the private sector, paving the way for price reductions.

The stability of the exchange rate and the increase in the customs releases of goods and production inputs had been crucial to the easing of prices, Osama Al-Shahed, Chair of the Giza Chamber of Commerce, told Al-Ahram Weekly.

He said that the price of cooking oil had fallen by an average of 35 per cent to around LE65 per litre. Meat prices had also cooled, with imported Indian meat selling at LE285 per kg, compared to LE340 earlier. Local meat prices have also fallen from an average of LE400 per kg to LE350, after feed prices dropped from LE31,000 per ton to LE22,500.

To follow-up on the price reductions, the prime minister has created ministerial teams tasked with monitoring prices in supermarkets across the country and preparing detailed print and audiovisual reports to document the movement of prices on the ground.

He has also asked the Ministry of Supply and Internal Trade to work together with the FEDCOC and the Federation of Industries to compile a daily report on actual price decreases.

Wholesale prices have dropped by more than 30 per cent, according to statements by FEDCOC Chair Ahmed Al-Wakil, while retail prices have dropped by more than 20 per cent. Al-Wakil added that the plan is to ensure that the greater reductions eventually reach retail markets so that the lower prices can be felt by all.

According to FEDCOC Secretary-General Alaa Ezz, the country’s supermarket chains have played an important role in bringing prices down, adding that the government is working with some 1.5 million traders nationwide.

In a television interview in mid-April, Ezz said that the FEDCOC had asked supermarkets to post the new prices of products alongside the old so that consumers would be aware of the amount of the reductions.

He said the government was doing everything possible to bring food prices down, including by following through on compliance with regulations. Traders manipulating weights or failing to print the weight of a product on its packaging risk penalties, he said.

However, as encouraging as the reductions in food prices are, more are needed, Hazem Menoufi, a member of the Food Division of the FEDCOC, told the Weekly.

He said that lower commodity prices should lead to lower prices of manufactured foods. Since basic commodities are used in other products, a reduction in the price of sugar, for example, should be followed by lower prices of juices and other beverages.

Lower flour prices should be followed by reduced prices of pastries, tortillas, and other manufactured products, he said.

Menoufi said that bringing down the prices of manufactured foods would be the next step, as thus far their prices do not reflect the lower commodity prices. “Government ministries and regulatory agencies have an important role to play here,” he said.

Al-Shahed of the Giza Chamber of Commerce expects the prices of manufactured goods to gradually drop as production costs decline with the beginning of the new production cycle, the continued availability of hard currency, and the speedy release of goods from customs.

According to Capital Economics, inflation will continue to ease over the rest of this year and into 2025, but it will remain above the Central Bank of Egypt’s (CBE) target rate well into next year. The CBE targets an inflation rate ranging between five and nine per cent.

“Inflation will continue to tick down over the rest of this year, but it will still be above 25 per cent year-on-year by the end of this year and won’t fall back to single digits until early 2026,” Capital Economics said.

* A version of this article appears in print in the 16 May, 2024 edition of Al-Ahram Weekly

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