The fourth quarter of 2023 saw sudden hikes in the prices of goods such as steel, cement, agricultural commodities, and staple foods. The price of a kg of onions skyrocketed to LE35 in November 2023 from LE1.5 in November 2022. The price of a kg of sugar surged from LE27 in October 2023 to LE50 the following month.

Such developments pushed Prime Minister Mustafa Madbouli to designate seven food commodities as strategic products last week, prohibiting their stockpiling by merchants for six months in an attempt to regulate the market. These products are mixed oil, fava beans, rice, milk, sugar, pasta, and white cheese.

According to Madbouli’s directive, producers, suppliers, distributors, and sellers of the seven products are mandated to inform supply directorates nationwide about the stocks they have of these commodities. Merchants proven to be hoarding these items to limit their supply and push up their prices will be subject to financial penalties or prison terms.

Head of the Consumer Protection Agency (CPA) Ibrahim Al-Segini has said in several videos on social-media platforms that the CPA will establish a unit for market studies to analyse existing trends and forecast any possible future difficulties in the supply of commodities in order to be prepared for or to prevent them from happening.

“Our current focus is on monitoring the entire process, starting with goods production, transportation, and distribution chains. We compare production quantities reaching wholesale markets, then further track quantities reaching retailers. This allows us to monitor the final consumer price, identifying the links where imbalances may occur,” Al-Segini said.

The government has been grappling with sudden price increases since November 2016 when it initiated its economic-reform programme. A pivotal decision in this process was the liberalisation of the exchange rate of the dollar against the pound, leading to a decline in the value of the pound and thus a matching increase in prices.

The prices of commodities also witnessed jumps following meetings of the Petroleum Products Pricing Committee, which convenes once every three months, to raise fuel prices. The increases usually go above the 10 per cent ceiling placed by the consumer protection law, and they have been exacerbated by foreign factors such as the Covid-19 pandemic, the China-US trade war, and the Ukraine-Russia conflict.

Hassan Abu Saddam, head of the Farmers Syndicate, said the government can mitigate arbitrary price increases, particularly those concerning vegetables and fruit. He gave the example of potatoes, which are currently cheap, a fact that some merchants may exploit to stockpile large quantities and then release them when the crop cycle nears its end and the supply decreases so that they can sell them at higher prices.

The government could seize this opportunity, according to Abu Saddam, to stockpile quantities itself and then sell them at reasonable prices at the end of the cycle, thus preventing an overshoot in potato prices.

“This could be a temporary and immediate measure to address the problem,” Abu Saddam added.

In the long term, however, the Ministry of Agriculture should prepare structured plans for all crops rather than the current random plans. Abu Saddam said that farmers choose to cultivate crops that can reap more profits, and this could lead to the prices of these crops decreasing due to oversupply and prompting farmers to refrain from cultivating them in the following season.

The inevitable result of this is that prices then increase with the drop in supply. “This fluctuation in quantities creates opportunities for speculation and price manipulation,” Abu Saddam explained.

Plans prepared in advance with the clear identification of the area cultivated with each crop based on local demand would help guarantee a balance between supply and demand, he said.

In order to encourage farmers to stick to such plans, they could incorporate various forms of support like providing seed subsidies. Such plans could also involve allocating areas to vegetables and fruit that have high export potential.

The government should address the root of the problem not the end result, Abu Saddam suggested, adding that abundance is the key to eliminating price manipulation.

The best example is the case of onions, he said, as even with the decision to halt onion exports, prices did not decrease until after the winter crop was harvested and there was enough supply in the market.

MP Mohamed Attia Al-Fayoumi, head of the Qalioubiya Chamber of Commerce and treasurer of the General Federation of Chambers of Commerce, praised Madbouli’s decision to designate strategic commodities as a way of controlling prices.

While this did not set an obligatory price for each of the strategic products, it would prevent hoarding and thus lead to increasing the supply of these commodities in the marketplace, resulting in price reductions, he said.

* A version of this article appears in print in the 11 January, 2024 edition of Al-Ahram Weekly