UAE to fix food prices as global commodities rise

Reuters, Thursday 26 May 2011

The oil rich state is taking precautionary measures to avoid unrest slamming the region

The United Arab Emirates plans to combat rising global commodity prices by fixing the cost of about 400 foodstuffs and household products at 70 outlets in the Gulf Arab state, an economy ministry official said on Thursday.

This is the latest of several moves by the UAE, which has so far avoided the unrest that is spreading across the region, to cut prices and subsidizes basic items. Rising food prices have become hugely sensitive around the world, helping fuel protests that toppled the rulers of Tunisia and Egypt earlier this year, with unrest spreading across North Africa and the Middle East.

The measure, starting on June 1 and so far set until the end of the year, is expected to help retailers including France's Carrefou. It is also projected to be easily absorbed by the oil-rich country that imports most of its food and already subsidizes other consumer goods.

"These outlets include Carrefour, cooperative societies, Lulu Hypermarket and Spinneys which form 75 per cent of the market share of retail outlets in the UAE," Mohammed al-Shihhi, undersecretary at the economy ministry, told a conference.

"We have received indications from different organisations that there will be price increases in most commodities in 2011 up to 2015," he said.

The ministry did not provide details on the amount that will be allocated for the subsidy or if it will be financed separately by each of the emirates.

Shihhi however said the initiative was not be related to the unrest that has threatened to topple the leader of nearby Yemen and caused worries in neighbor Saudi Arabia.

Saudi King Abdullah unveiled $93 billion in social handouts in March, on top of another $37 billion announced less than a month earlier.

Concerned about regional unrest, the UAE has said it will spend $1.6 billion to improve infrastructure in less developed northern emirates. It has raised military pensions by 70 per cent and introduced bread and rice subsidies.

Annual inflation in the UAE, the world's third largest oil exporter, edged down slightly to 1.1 per cent in April after a 1.2 per cent increase in the previous month.

Food costs, which account for 14 per cent of the UAE consumer basket, rose by 1.3 per cent month-on-month in April after a 0.4 per cent drop in March.

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