Decreasing spending on energy subsidies in the new general budget will raise market prices on basic items, said Mahmoud Al-Askalany, head of Citizens Against Price Rises.
Adding that petrol prices always drive the Egyptian market, Al-Askalany also defended the government’s decision to decrease energy expenditures. He noted that “because subsidies don’t reach those who need them”.
Al-Askalany suggested: “The government should totally lift the subsidies that go to the industrial sector, if it really wants to help the poor”.
In order to control prices, the government should increase the product supply in state-owned consumer complexes and set a certain ceiling profit rate from the production cost, Al-Askalany added.
Expecting the same result, head of groceries division at the Federation of Egyptian Chambers of Commerce (FEDCOC) Ahmed Yehia said that prices of basic items will increase due to production costs increasing. Prices will be affected by low energy subsidies, such as transportation costs.
Before taking office, President Abdel Fattah Al-Sisi has promised to adopt certain mechanisms to control the rising prices of basic goods in the market. Al-Sisi stressed that the measures would not include imposing fixed prices.
In an effort to control the market and protect low income consumers, the interim government decided in September to impose price ceilings on fruits and vegetables. The decision, a bid by the interim government to protect consumers from merchants overstating prices, was criticised by FEDCOC for encouraging the recovery of black and parallel markets.
Subsidies on basic food commodities in the new budget increased to stand at EGP 34.05bn, marking a 10% increase compared to EGP 33.8bn in FY 2013/2014.
In response to rising goods prices, Minister of Supply Khaled Hanafy announced in May that the ministry will cut prices of food commodities. Prices will be cut by 30% over the next three months, and will include goods such as poultry, meat, vegetables and fruits.
The action was said to be undertaken in coordination with the armed forces, which will supply state-owned consumer complexes with basic goods, said Hanafy.
Addressing the prices issue, the Food Industries Holding Company (FIHC) was moved to the supervision of the Ministry of Supply instead of the Ministry of Investment.