Dollar madness

Safeya Mounir , Monday 12 Feb 2024

People across the country were stunned by the sharp hikes in food prices last week.

The prices of poultry increased by 40 per cent over the week
The prices of poultry increased by 40 per cent over the week


The price of a kg of beef jumped by LE30 to LE50, hiking to LE370-450 last Thursday, depending on city or region. Until then it had cost LE290 in popular neighbourhoods and government outlets or LE350 in more upscale stores.

The same thing happened to chicken. Breast fillets rose to LE220-250 a kg up from LE160-180 the week before, again depending on the neighbourhood. Dairy products have also been hit, with prices of packaged milk soaring by LE7 to reach LE50 a litre.

Said Zaghloul, a member of the Butchers Division of the Giza Chambers of Commerce, attributes the phenomenon to the current dollar shortage. Hard currency is needed to import raw materials or other inputs that go into food production, he said. Traders and producers with the means to do so sometimes resort to the black market to obtain dollars at an exchange rate that has recently hit LE75 to the dollar.

“The price of meat has risen by LE100 in some places,” Zaghloul said. “It depends on the butcher and how much he has to pay for rent and labour. Some butchers might also deduct extra fat from the price, while others will pass on a percentage of the waste to customers.”

In Zaghloul’s opinion, poor agricultural and food production policies are to blame. They have led to a heavy dependency on imported commodities, putting consumers at the mercy of dollar availability.

According to press reports, animal-feed companies in Egypt have begun to sell feed corn and soybeans to traders and distributors in dollars. Imported feed has recently undergone successive price hikes in the local market as importers struggle to meet rising shipping costs.

Last week, several feed producers and importers met with local traders to discuss the option of selling fodder, and especially feed corn, in the local market in dollars or euros, industry and government officials told Asharq Business.

Feed prices have hit record highs due to rising demand and shortages in supply. The cost of feed corn jumped by 48 per cent in January compared to December to reach LE20,000 per ton.

The price increases are linked to the rising price of the dollar on the black market, which importers are forced to resort to in order to obtain the hard currency they need. The banks have announced that they will not make dollars available to importers, said Matti Bishai, head of the Committee on Supply and Internal Trade of the General Division of Importers at the Federation of Egyptian Chambers of Commerce (FECOC)

Recent press reports suggest that the banks contributed to the rising cost of the dollar in the black market when they announced they would provide dollars to clients to arrange their import needs against a commission of 10 per cent of the dollar amount.

This condition sent importers rushing to the black market to obtain their dollar needs.

Egypt has been suffering from a dollar crisis since the outbreak of the war in Ukraine two years ago, which interrupted commodity supply chains and drove up prices. The ongoing Israeli war on Gaza has aggravated the crisis, especially because of its impacts on navigation in the Suez Canal and tourism.

A new agreement with the International Monetary Fund (IMF) could help to offset some of the current difficulties.

The US investment bank Goldman Sachs believes that Egypt is about to secure a $12 billion financing deal with the IMF, which would be comprised of around $7 billion from the IMF and another $5 billion from international partners.

It said Egypt is looking at a financing gap of $25 billion over the next five years. The country would need $8 billion to fulfil its liabilities and another $17 billion to restore foreign-exchange market performance and bolster confidence in the Egyptian pound, it said, with the $12 billion financing deal covering almost half the gap.

“As long as there are two exchange rates for the dollar and no official channels to meet importers’ hard-currency needs, the latter will remain at the mercy of the black market, and prices will continue to climb,” Bishai said.

Another devaluation of the pound will also not solve the problem. “As long as dollars aren’t available to importers, the crisis will continue. Dollar availability is the key to bringing prices under control,” he added.

Bishai does not expect to see prices fall in the short term if the price of the dollar falls in the black market. Traders have already paid for their imports based on the higher rate, so they will not cut prices for consumers, he said, adding that this could change if they can make their next purchases at cheaper rates.

* A version of this article appears in print in the 8 February, 2024 edition of Al-Ahram Weekly

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