The war on prices

On Sunday, the government of Prime Minister Ahmed Nazif fell under heavy parliamentary fire. As many as 11 opposition and independent MPs launched a scathing attack against the Nazif government, alleging that its policies are always designed to serve the business elite loyal to the ruling National Democratic Party (NDP). As a result, asserted MPs mostly belonging to the outlawed Muslim Brotherhood group and to leftist parties, not a single day goes by in Egypt without demonstrations, strikes, sit-ins and clashes between workers and the police. “There is deep- seated anger at the corruption and ever- growing wealth of the ruling NDP business elite, at the expense of the majority of poor Egyptians,” said Ibrahim El-Gaafari, a Muslim Brotherhood MP.

MPs cited what they called “the astronomical rise in prices of cement, iron and steel last year,” insisting that the government left citizens prey to a cartel of private cement and steel producers who gained hefty illegal profits from the proliferation of their monopolies on the local market.

MPs also claimed that the Nazif government had not done enough to contain the skyrocketing of basic food prices on the local market, or to provide the poor with protection from the ravages of the global financial crisis.

In response, as many as four cabinet ministers were mobilised to stand up to the attacks. Minister of Trade and Industry Rachid Mohamed Rachid strongly refuted the opposition”s allegations “as strictly instructed by President Hosni Mubarak. The interests of the poor come on the top of the agenda of the Nazif government.”

Rachid boasted that a package of government-inspired measures led to bringing inflation rates from 23.6 per cent in August 2008 to 14 per cent last February. These highly effective measures, added Rachid, included boosting the budgetary subsidy allocations from LE54 billion in 2006 to LE58.4 in 2007 and to LE92.4 billion in 2009. Besides, said Rachid, the Nazif government offered a 30 per cent bonus to state employees and civil servants so as not to feel the pinch of high inflation.

“Not to mention that the number of holders of ration cards was boosted from 10 to 32 million, now covering for the neediest classes,” said Rachid. All of these measures combined, he argued, helped the poor face inflationary pressures and to secure their basic needs. Rachid said he has high hopes that inflation rates would further fall below 10 per cent in the next few months, thus giving the poor a better chance to absorb the shock of the global financial crisis.

In Rachid”s words, it is true that the global economic downturn would siphon off Egypt”s high revenues from tourism, exports and Suez Canal ship traffic. “But it is also true that the government decided not to stand helpless against these adverse shocks,” he said.

Further Rachid indicated that the government has earmarked LE13.3 billion in new budgetary allocations to stimulate the economy and fight unemployment.

He attributed last year”s dramatic rise in prices of cement to a 30 per cent rise in demand, indicating that the Ministry of Trade and Industry intervened to put a ceiling on sale prices so as to avert another explosion of prices. He also explained that additional tough measures helped bring the cement price from as high as LE800 last January to as low as LE475-540 currently.

Rachid also boasted that tough measures caused the price of steel to fall from $1,300 in July 2008 to $355 in February this year. He highlighted that 14 cement factories, currently under establishment, will boost production by 20 million tonnes and ensure that prices remain stable on the long run. “Opening the door for imports and building new production lines would sure discourage any cartels from monopolising the market or manipulating prices,” the minister concluded.

In the meantime, the Minister of State for Economic Development Othman Mohamed Othman acknowledged that the global financial crisis caused the unemployment rate to climb from 8.6 per cent in the first quarter of 2007/08 to 8.8 per cent in the first quarter of 2008/09. “This distressing fact alerted the government”s attention to the fact that efforts in the next period should be primarily focussed on fighting unemployment,” said Othman.

And in response to allegations that the poverty rate has risen, Minister of Social Solidarity Ali Meselhi said that World Bank reports show that “the rate of poverty in Egypt fell from 19.5 per cent some years ago to 18 per cent this year.”

The Source