While experts agree that the government’s decision to increase customs duties on 364 types of imported products will not greatly affect the rate of inflation, their views differ when it comes to the timing and how this move will actually affect the state and its citizens.
Abou Bakr Emam, the head of Prime Bank’s research department, believes the decision will slightly affect the inflation rate, because the goods listed do not include vital products that the majority of Egyptians would use. It is clear what the government’s goal is, according to its timing: saving foreign reserves and attracting more hard cash in foreign currencies.
He added that the number of imported products listed will decline due to the system of demand and supply. Those who do use these products will decline proportionally due to the new, higher price tag. Emam would like to know what share of the total imports to Egypt do these listed goods account for, and what quantity of these goods does Egypt import.
The effect of this decision on foreign trade is still unclear. He said that depending on the World Trade Organisation’s protocols, Egypt may have to take on this decision as a two-way street with affected countries.
“If this decision contributes to saving a considerable amount of foreign currency, then it is a good move,” Emam said.
Contrary to this, Aliaa El-Mahdy, professor of economics and dean of the faculty of economics and political science at Cairo University, describes this decision as unacceptable and bizarre.
The quantities being imported into Egypt have declined by 15% over the past two months due to the flotation of the national currency and the high price of the US dollar. El-Mahdy said this decision has made people uncomfortable on top of the price hikes across fuel, electricity, water, medicine, and transportation.
This is bad timing on the government’s part, she added.
She agreed with Emam that any effect on the inflation rate with not be significant. To know the exact repercussions of the decision, El-Mahdy said the government must announce what percentage of Egyptian imports these listed products account for from the total.
“We can only evaluate the decision after knowing how much it can save Egypt,” she said.
This decision will not improve local industries as the government claims, rather it may raise production costs due to the higher price of imported items, she added. This would keep local industries in poor conditions without being able to develop.
She believes that local industries would only have a chance to improve their products to compete with imported products, if the free-market system is implemented.