A parliamentary debate on controlling inflation began this week. Abdel-Hadi Al-Qasabi, leader of the Support Egypt majority bloc and chairman of the Social Solidarity Committee, said the move was in response to President Abdel-Fattah Al-Sisi’s Decent Life initiative.
In a tweet on 2 January, President Al-Sisi wrote: “Ordinary Egyptian citizens have sacrificed a lot, bearing the brunt of economic reforms… and I am calling on all state institutions to work closely with civil society organisations to ensure the poorest members of society can access a decent life in 2019.”
Al-Qasabi said cabinet ministers will be summoned to parliament to explain how they intend to facilitate “the president’s Decent Life initiative.
“We want cabinet ministers to tell us how they are going to cap high prices, tackle black markets and monopolies and ensure essential goods are available at affordable prices,” said Al-Qasabi.
“So far the government’s efforts to curtail inflation have failed. The neediest have paid a very high price for economic reform and so we hope this initiative will allow the poorest to lead a decent life.”
Yomna Al-Hamaki, a professor of economics at Ain Shams University, argues that “monopolies have played a leading role in raising prices and making life very difficult for poorer citizens,” and recommends that “anti-trust laws be amended to discipline markets and support free trade”.
Minister of Electricity Mohamed Shaker was the first cabinet member to come to parliament to explain his department’s policies.
Shaker told MPs on 27 January that the Ministry of Electricity was committed to ensuring the poorest consumers received subsidised electricity. “Citizens with low rates of consumption will continue to have their power subsidised,” he said.
The 2016 IMF-inspired economic reform programme originally envisaged the phasing out of all electricity subsidies by June 2019. “But the floatation of the Egyptian pound led to increased prices of basic goods and made life difficult for a majority of citizens. It was therefore decided that the complete phasing out of electricity subsidies be delayed until 2022,” said Shaker.
By 2022 all state, public and private institutions will pay non-subsidised electricity bills, said Shaker. “Domestic consumers — who account for 46 per cent of Egypt’s total consumption in Egypt — will be divided into brackets according to income and district.
“High-income citizens in upscale districts with high consumption rates will cease to receive any subsidies, while those in poorer districts consuming less than 200 megawatts a month will continue to be subsidised at existing rates,” said Shaker. “We want those who can best afford it to shoulder the greatest burden of the economic reform programme.
“The electricity sector in Egypt needs LE37 billion every year if it is to meet growing demand but we receive just LE16 billion from the annual budget.
“The electricity sector also owes LE160 billion to fuel suppliers. We had no choice, therefore, but to liberalise prices and settle our debts, though this cannot be done at the expense of the poorest in society.”
Minister of Supply Ali Moselhi told MPs on 28 January that his ministry is providing ordinary citizens with basic food products at affordable prices.
“Our strategy is to protect poor and limited income citizens from monopolistic practices, to which end the ministry has begun opening consumer outlets across the country which sell subsidised food, including rice, meat and oil, to poorer citizens,” said Moselhi.
Some MPs accuse Moselhi of not doing enough to discipline the retail market and protect citizens from greedy merchants.
Suez MP Abdel-Hamid Kamal argued, “the main task facing the Ministry of Supply is to end monopolistic practices.
“Unfortunately, what we have seen since economic reforms began at the end of 2016 is poor citizens being abandoned to greedy traders without any protection from the Ministry of Supply.”
“Poor and even average-income citizens are the ones who feel the pinch of economic measures such as the pound floatation and subsidy cuts.”
Hala Abul-Saad, parliamentary spokesperson of the Conservatives Party, urged Moselhi to consider fixing the price of key products. In response, Moselhi said, “since economic reforms began in 2016 the Ministry of Supply has attempted to ensure the poorest in society can access their basic food needs via ration cards.
“Around 50 million citizens are covered by the ration card system which has helped them absorb the worst effects of economic reform measures. In line with President Al-Sisi’s Decent Life initiative, the Ministry of Supply will play a greater role by opening consumer outlets which will be operated by young people from each governorate and ensure goods are sold at affordable prices and with very low margins.”
Nevine Gamie, executive chair of the Project Development Apparatus, an affiliate of the Ministry of Supply, told MPs that, “a nationwide network of consumer outlets has already been prepared to offer goods to citizens at much cheaper prices.”
Moselhi refused to consider imposing price controls from above.
“Many believe the government’s fixing prices will control inflation. Experience has shown, however, that it will simply lead to the black market proliferating.
“Obligatory pricing can only work in socialist economies, when the public sector dominates the production of goods. In Egypt production sectors are mainly outside state control. The private sector has become the major producer, and the constitution effectively prohibits state intervention in local markets.”
* A version of this article appears in print in the 31 January, 2019 edition of Al-Ahram Weekly under the headline: Protecting the poorest?