Reform perks

xx Al-Ahram Weekly Editorial
Tuesday 8 Oct 2019

Egyptians are not used to seeing prices drop. The norm has always been that when prices increase, they never decrease again, except for vegetables whose price fluctuates seasonally. When prices shot through the roof following the floatation of the pound three years ago, everyone thought they would never cool down, not even if the pound appreciated against the dollar. But events over the past few months have proven everyone wrong. The pound has appreciated by around nine per cent against the dollar since October 2018. This strengthening of the pound is finally being felt in the market with several staples seeing their prices drop. Sugar, rice, cooking oil, tea and pasta have seen their prices slashed by between 10 to 20 per cent to the pleasure of consumers. 

Another first for Egyptians was the reduction in fuel prices. For the past five years, Egyptians have seen fuel prices go up five times as the government eliminated fuel subsidies. Egypt’s Fuel Automatic Pricing Committee reduced the price of gasoline in the local market by 25 piasters per litre as of Friday, 4 October. The committee said in a statement that the decision comes in light of the global decrease in Brent oil prices between July and September to $62 per barrel, as well as the recent depreciation in the value of the dollar.

Three months ago, the government began implementing a quarterly price index mechanism that adjusts prices on all petroleum products in accordance with global gas prices and the price of the dollar against the Egyptian pound. The step was part of the economic reform programme implemented with the support of the International Monetary Fund. 

On a similar note, the government has also lowered the domestic price of gas for the cement, metals and ceramics industries. The domestic price for the cement industry was set at $6 per million Btu from $8 and at $5.50 per million Btu for metals and ceramics from $7. Prime Minister Mustafa Madbouli said in a statement these prices would be reviewed every six months. 

Though the reduction in fuel prices, ranging from three to five per cent, was minute this time around and passing it on to the public may prove impractical, it indicates that a system is in place and functional and is a way for citizens to get used to the idea that fuel prices could fluctuate up or down.

A greater reduction in the price of natural gas to industries, however, could positively impact consumer prices because it means lower production cost for the manufacturers. 

Citizens have endured hardship for long; this could be a break for them, though the length of that break will depend on how strong the economy continues to grow, and on global factors such as the price of petroleum, as well as on the government’s commitment to reforming the investment and industrial environment to encourage greater job creation. 

Amidst all this, the most vulnerable citizens must be always protected. Thousands of citizens complained that procedures to filter the ration card database had left them out unjustly. Others complained that they were unable to join the system despite meeting the criteria. To reassure the public the Ministry of Supply and Internal Trade issued a statement saying that 1.8 million individuals were added to the list of beneficiaries since February, “in compliance with the directives of the president”. The ration card system, which covers around 70 million Egyptians, is a form of cash subsidy where holders are entitled to LE50 worth of foodstuffs each month for free, and five loaves of bread a day, priced at LE0.5 per loaf. 

President Al-Sisi’s tweet that “the government is committed to protecting the rights of low-income citizens” was intended to reassure those affected by the filtering procedures, but it reflected the general attitude that the government must adopt, to look out for those in need. 

*A version of this article appears in print in the 10 October, 2019 edition of Al-Ahram Weekly.

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