Egyptian gov’t plans wider food imports, as food prices drive up inflation
The country’s General Authority for Supply Commodities (GASC), which acts as Egypt’s main importer of staple products, said earlier this month it would issue a tender for poultry for the first time ever. A day later, Egypt’s cabinet issued a statement saying it would take “all necessary measures” to control the supply of goods and their prices, according to Reuters.
Egyptian president Abdel Fattah Al-Sisi earlier promised the government would intervene to bring down rising food prices in the country.
Currency shortage hits food importers
The root of Egypt’s food price crisis lies in the country’s shortage of foreign currency, which have been substantially constrained since the 2011 revolution. Since that year Egypt’s reserves of US dollars have fallen by nearly half, from US$36bn then to US$16.4bn last month.
In order to conserve supply, the government has rationed dollars through weekly auctions, leaving the black market the only alternative for importers, at substantially higher rates. But Egypt’s central bank cracked down on this practice by placing sharp limits on dollar deposits into Egyptian bank accounts.
However the head of the importers section of the Cairo Chamber of Commerce, Ahmed Sheha, told Daily News Egypt he believed the dollar crisis was a product of manipulation, not genuine scarcity. He also said importers were smuggling significant quantities of food products, and criticised proposals for the government to fix prices of imports.
While the currency crisis has hit all industries, including food production – as Dutch firm Rademaker observed recently – currently the worst hit are food importers. Egypt imports around 70% of its food, including massive quantities of staples such as wheat.
Food blamed for inflation spike
“The further rise in Egyptian inflation to 9.7% [year-on-year] in October was driven almost entirely by an increase in the food component, which is highly volatile,” said a research note from Capital Economics, an economic research company, issued last week, adding that excluding food, inflation reduced last month.
Egypt’s food sector has been highly active following the rise of President Sisi, with a number of acquisitions among the country’s food producers, from Rashidi El Mizan and Mass Food last month, to Bisco Misr in January. And firms including Arla Foods, PepsiCo, Almarai and Hostess Brands have all established or extended joint ventures.
Domestic expansion has also seen a boost, with companies such as Domty and Galina planning stock market floatations to enable growth plans – even while other firms said the currency issues were limiting their ability to grow.