Wednesday, May 11, 2011
Is Egypt on the Verge of Starvation?
Is Egypt on the verge of starvation? It seems that a combination of rising food prices, lack of credit and the economic consequences of revolution are putting Egypt in danger of starvation.
Egypt's political problems - violence against Coptic Christians, the resurgence of Islamism, and saber-rattling at Israel, for example - are not symptoms of economic failure. They have a life of their own. But even Islamists have to eat, and whatever political scenarios that the radical wing of Egyptian politic might envision will be aborted by hunger.
The Ministry of Solidarity and Social Justice is already forming "revolutionary committees" to mete out street justice to bakeries, propane dealers and street vendors who "charge more than the price prescribed by law", the Federation of Egyptian Radio and Television reported on May 3.
According to the ministry, "Thugs are in control of bread and butane prices" and "people's committees" are required to stop them. Posters on Egyptian news sites report sharp increases in bread prices, far in excess of the 11.5% inflation reported for April by the country's central bank. And increases in the price of bottled propane have made the cost of the most widely used cooking fuel prohibitive.
The collapse of Egypt's credit standing, meanwhile, has shut down trade financing for food imports, according to the chairman of the country's Food Industry Holding Company, Dr Ahmed al-Rakaibi, chairman of the Holding Company for Food Industries. Rakaibi warned of "an acute shortage in the production of food commodities manufactured locally, as well as a decline in imports of many goods, especially poultry, meats and oils". According to the country's statistics agency, only a month's supply of rice is on hand, and four months' supply of wheat.
The country's foreign exchange reserves have fallen by US$13 billion, or roughly a third during the first three months of the year, Reuters reported on May 5. The country lost $6 billion of official and $7 billion of unofficial reserves, and had only $24.5 billion on hand at the end of April. Capital flight probably explains most of the rapid decline. Egypt's currency has declined by only about 6% since January, despite substantial capital flight, due to market intervention by the central bank, but the rapid drawdown of reserves is unsustainable.
At this rate Egypt will be broke by September.
Aren't you glad Mubarak's gone?
Labels: Egyptian economy, food shortage
posted by Carl in Jerusalem