CAIRO: Last year, Egyptians tread anxiously into Ramadan as inflation hit a record high of 23 percent in August 2008 in the lead up to the holy month. Food prices soared and a few weeks later, the ripple effects of the economic crisis hit Egypt’s shores.
Inflation has since been on a steadily decline, reaching 10 percent in July, and international commodity prices have followed, but food prices in Egypt seem to have found their comfort zone at the top.
With just a week until Ramadan, traditionally one of the highest periods of consumption, many are wondering why dropping inflation has not translated into lower food prices.
Some figures suggest that food prices have shot up at least 20 percent.
As one housewife said, it seems that “grocery stores don’t know the official figures.
Simon Kitchen, senior economist at Cairo-based investment bank EFG-Hermes, attributed the increase in prices to a poor harvest this year, and in the past month, to the traditional “pre-Ramadan rise.
Nawal, a 37-year-old mother, said, “We only hear about prices going down from the official media – in reality, it never happens.
For Riham, a mother of two who spoke to Daily News Egypt as she was stocking up on Ramadan necessities at a hypermarket this week, this year will be even tougher. “Meat and chicken prices are up at least 20 percent. Nothing is going down.
Another consumer put the fault on traders, saying the reason that goods at bakeries and grocery stores cost the same – even though production costs have come down – is because “traders don’t have the [right] mentality to run a business . it’s not the government’s fault. According to the official statistics agency CAPMAS, prices rose 2.2 percent in July, with food and drinks rising 4.2 percent.
“The monthly changes reflect the seasonal changes in inflation, related to the increased consumption in the summer and in the lead up to Ramadan, Reham ElDesoki, senior economist at investment bank Beltone Financial, said in a note.
Basent Fahmy, of the Egyptian Saudi Finance Bank, sees no change in the price of “oil, rice, lentil and sugar, the main commodities consumed by Egyptians.
“In Ramadan, all families tend to consume more poultry and meat, even the lower strata, which makes prices rise, she added.
Abdallah Mohamed, 42, who owns a small grocery store in Maadi, noted an increase in the price of oil and sugar when he went to stock up on inventory from wholesalers.
The crisis has affected the budget of Egyptian families in many ways, Hervé Majidier, Carrefour Egypt managing director, said. “They buy more of the necessities. the food division is 60 percent of our sales, he added.
“Ramadan specialties, however, such as yameesh, have seen a 30 percent decrease in price, Majidier said.
Rates and prices
Hanaa Kheir El-Din, executive director of the Egyptian Center for Economic Studies (ECES), said as food prices rise, the Central Bank should be more inclined to keep interest rates steady.
The central bank cut key overnight interest rates by 50 basis points at the end of July, to 8.5 percent for deposits and 10 percent for lending. On the back of falling inflation, the CBE has slashed interest rates five times so far this year.
ElDesoki agreed, saying, “We expect the Central Bank of Egypt could be inclined to keep interest rates unchanged at its next meeting on Sept. 17, should inflation figures reflect strong non-food inflationary pressures.
However, EFG’s Kitchen expected the central bank to keep cutting rates to “stimulate investment and growth.
“It takes time for the results of these cuts to show, a year or two, he added.