The Egyptian government is applying pressure to traders and manufacturers to reduce food prices. It is seeking significant price reductions of 15%-20% before the end of March 2024 and reductions of 30% by the end of Eid Al-Fitr.
The government has completed customs release procedures for goods valued at over $4.5bn. The price reductions will be focused on food such as beans and lentils, beverages and basic household essentials. There is no word from suppliers as to how this level of discounts will be achieved and despite the Egyptian government describing it as a collaborative effort, it looks strongly like politicking. The government has said that it will insist that traders display the new, reduced prices prominently.
Separately, the government has announced its plans to build strategic stock of essential goods to regulate markets, partly as a response to widespread stockpiling by traders and consumers alike. The message to traders is that they will face punishments for building stockpiles of goods where they expect prices to rise.
The Egyptian government wants to increase the strategic reserve of essential goods by about 20% to enable it to mitigate political instability caused by food shortages. Food prices are starting to stabilise as inflation falls and the Egyptian pound has finally stabilised.
The government has decided to keep the prices of unsubsidized bread, saying that the cost of flour has fallen by 40% in March. The bakery sector had pushed for price rises of 20%-25% because of the higher cost of diesel, gas and sesame.
The moves indicate that President Sisi, who won a third six-year term with 89.6% of the vote in December 2023, plans to continue running the Egyptian economy with the same heavy-handedness as before, which will dismay potential investors in Egypt’s food sector. Liberalisation had been promised as part of the IMF relief package but dismantling the control the military exercise over the industrial sector and its distorting effect on how the market operates appears no more likely than it did before December.
