Despite the commodities exchange, why is the government failing to control prices?

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Amidst the Egyptian citizen’s affliction and suffering with the rise of commodity prices and the inability of most citizens to meet their basic needs, the government’s announcement of establishing a commodity exchange raised more concerns regarding the consumers’ negative impact. The fears of producers and consumers over the commodity exchange came because of the repeated government failure for several years to control the rise in prices and some businessmen and intelligence companies’ control of the markets.

The Egyptian market is subject to the control of many monopolists and speculators, and various government decisions contribute to the rise in prices and increase the burden on people, despite its repeated announcements of monitoring the markets, controlling costs, and holding traffickers accountable for people’s livelihood.

The Ministry of Supply claimed, in a statement a few days ago, that the commodity exchange aims to reduce the circulation of commodities and encourage small traders and producers to enter them within the organised trade system, and it will also increase the rates of circulation of storable goods based on increased transparency and supply and demand mechanisms. This statement was after the government completed the establishment of the Egyptian Commodities Exchange Company with a capital of EGP 91 million distributed on the Egyptian Stock Exchange, the Internal Trade Development Agency, the Holding Company for Silos and Storage, and the Commodity and Supply Authority. Several commercial banks, investment banks, Misr Insurance Holding Company, and Misr Clearing Company, shared in the Egyptian Commodities Exchange.

Rising prices

According to the Ministry of Supply statement, it is scheduled to start offering many essential commodities on the commodity stock exchange, such as wheat, oil, sugar, and rice, as a first stage in the first and second quarters of 2021. The commodity exchange comes within the framework of repeated government announcements of controlling markets and controlling prices, whilst the opposite happens, as the government does not confront the military, intelligence, and businessmen companies that monopolise the market. The removal of fuel subsidies also contributed to raising transport prices, which was reflected in the prices of vegetables, fruits, and food commodities, whose prices have doubled in the past few years.

The markets witnessed a madly high price of the dollar against the pound following the government’s decision to liberalise the exchange rate, or what is known as the floating of the pound in 2016, in response to the International Monetary Fund’s conditions to obtain a loan. Floating the pound came despite the state’s reliance on imports to provide its basic needs, which led to the increase in prices and the depletion of citizens’ income, who cannot even afford to buy food and drink. All of the above and other reasons also coincided with the economy’s impact due to the continuing coronavirus crisis. A study by the National Planning Institute expected that the prices of food commodities in Egypt would rise until the end of December, with the continuation of the corona pandemic, so that the government failure to control prices would continue, and the commodity exchange would be at stake.

Commodity exchange

Many experts have expressed their fear of violent price fluctuations in the Egyptian market. And that is after the establishment of the commodity stock exchange since the country relies on imports to achieve self-sufficiency. Egypt imports from abroad on a monthly basis for many essential commodities such as wheat, oils, yellow corn, and other major products.

On his part the economist Hossam el-Shazly said that the commodity exchange is just a mechanism that the ruling regime will use as an excuse to increase the prices of essential commodities in an unprecedented way. He added that the government would take the free market as a cover for these price increases, away from government decisions, especially in light of the link between commodity prices and the global stock exchange and in light of the tragic state of the Egyptian currency.

The agricultural economist Jamal Siyam considered that “the harm of the commodity stock exchange is greater than its benefit if it is not managed properly,” adding in press statements that the risk is the presence of speculators aiming to achieve high profits, especially in the absence of transparency. Others believed that the stock exchange would allow economic groups close to the government, including the military, to make illegal profits by employing the supply and demand system and storing commodities. They considered that this stock exchange would directly cause increasing food commodity prices and constrict Egyptians in their livelihood.