<p dir="ltr">In this week&rsquo;s edition, we question government initiatives to bring food prices down and dig deeper into the real causes behind Egypt&rsquo;s continuing power cuts</p>
<hr>
<h2 dir="ltr"><span style="color: rgb(6, 71, 137);"><strong>The Government Initiative to Reduce Prices: Palliatives or Solution?</strong></span></h2>
<p dir="ltr" style="text-align: justify;">For the first time since the recent economic crisis began, the pace of inflation in food and beverage prices slowed in October, <a href="https://www.capmas.gov.eg/Pages/ShowHmeNewsPDF.aspx?page_id=/Admin/News/PressRelease/20231111134117_%D8%A7%D9%83%D8%AA%D9%88%D8%A8%D8%B12023%20_%209-11-%D8%A7%D9%84%D8%A8%D9%8A%D8%A7%D9%86%20%D8%A7%D9%84%D8%B5%D8%AD%D9%81%D9%8A.pdf&amp;Type=News">recording</a> an increase of 1.7%, down from 3.6% in September.&nbsp;</p>
<h2 dir="ltr"><img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1700400517imageEd. 48_En 3.png" alt="" width="546" height="213"></h2>
<p dir="ltr" style="text-align: justify;">This comes a month after the government launched its latest initiative to bring prices under control and curb inflation. As part of the initiative, the government <a href="https://www.cabinet.gov.eg/News/Details/68801">agreed</a> with representatives of the commercial and industrial sector to cut the prices of several food commodities by 15&ndash;25% and place prices on the packaging of these products; retail supermarket chains also agreed to forgo any profit from the sale of the agreed-upon set of goods.</p>
<h2 dir="ltr"><img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1700400552imageEd. 48_En 1.png" alt="" width="546" height="465"></h2>
<p dir="ltr" style="text-align: justify;">Commitment to the initiative, but&hellip;</p>
<p dir="ltr" style="text-align: justify;">Some areas have <a href="https://www.elaosboa.com/1226671/#:~:text=%D8%A7%D9%84%D9%85%D8%A8%D8%A7%D8%AF%D8%B1%D8%A9%20%D8%AA%D8%B4%D9%85%D9%84%20%D8%B3%D8%A8%D8%B9%20%D9%85%D8%AC%D9%85%D9%88%D8%B9%D8%A7%D8%AA%20%D8%B3%D9%84%D8%B9,%D8%A3%D8%B3%D8%B9%D8%A7%D8%B1%20%D8%A7%D9%84%D8%AF%D9%88%D8%A7%D8%AC%D9%86%20%D9%88%D8%A7%D9%84%D8%A8%D9%8A%D8%B6%20%D8%A8%D9%86%D8%B3%D8%A8%D8%A9%2015%25.">complied</a> with the terms of the initiative, and retail supermarket chains have announced several discounts, but some small merchants and grocery stores have been able to <a href="https://www.sis.gov.eg/Story/267407/%D8%B1%D8%A6%D9%8A%D8%B3-%D8%A7%D9%84%D9%88%D8%B2%D8%B1%D8%A7%D8%A1-%D9%8A%D8%AA%D8%A7%D8%A8%D8%B9-%D8%AA%D9%86%D9%81%D9%8A%D8%B0-%D9%85%D8%A8%D8%A7%D8%AF%D8%B1%D8%A9-%D8%AE%D9%81%D8%B6-%D8%A3%D8%B3%D8%B9%D8%A7%D8%B1-%D8%A7%D9%84%D8%B3%D9%84%D8%B9-%D8%A7%D9%84%D8%BA%D8%B0%D8%A7%D8%A6%D9%8A%D8%A9?lang=ar">evade</a> the directive given the lack of market regulation. The move to raise gasoline prices in November may also <a href="https://library.fes.de/pdf-files/bueros/tunesien/20432.pdf?fbclid=IwAR0QzJhxnrS6zK82pqm-iBeZeqrs1oYQUTPy6tnxlFJlh0Ste_Ai8a9ojB4">impact</a> inflation rates. Inflation remains extremely high in comparison to <a href="https://www.bloomberg.com/news/articles/2023-09-24/food-inflation-is-still-high-around-the-world">global rates</a>.&nbsp;</p>
<h2 dir="ltr"><img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1700400591imageEd. 48_En 2.png" alt="" width="546" height="432"></h2>
<h3><strong>What are the most significant problems with the initiative?</strong></h3>
<p dir="ltr" style="text-align: justify;">These government initiatives will <a href="https://www.shorouknews.com/news/view.aspx?cdate=11102023&amp;id=ba815108-818c-4c05-ac06-ff8c13a8765b">rein in</a> inflation in the short term, but they will not solve overall rising inflation&mdash;though the rate may rise more slowly in the medium term&mdash;given the <a href="https://www.shorouknews.com/news/view.aspx?cdate=11102023&amp;id=ba815108-818c-4c05-ac06-ff8c13a8765b">rising costs</a> of production inputs and manufacturing and production costs. This is not the first time that the government has instituted mandatory price discounts on basic food commodities, but the impact on inflation is <a href="https://www.elibrary.imf.org/display/book/9781513541259/ch003.xml">not durable</a> and affects only those goods covered by the government decision.</p>
<h3><strong>Toward effective price controls</strong></h3>
<p dir="ltr" style="text-align: justify;">It would be better to <a href="https://www.elibrary.imf.org/display/book/9781513541259/ch003.xml">adopt</a> a formula that combines policies that provide citizens with some short-term relief while solving structural problems in food markets in the long term.</p>
<p dir="ltr" style="text-align: justify;">1. Regulation&nbsp;</p>
<p dir="ltr" style="text-align: justify;">Action must be taken to <a href="https://1-a1072.azureedge.net/ebusiness/2023/2/15/%D8%AF%D9%88%D8%B1-%D8%AD%D9%83%D9%88%D9%85%D9%8A-%D8%A3%D9%85-%D8%B4%D8%B9%D8%A8%D9%8A-%D9%85%D9%86-%D8%A7%D9%84%D9%85%D8%B3%D8%A4%D9%88%D9%84-%D8%B9%D9%86-%D8%B6%D8%A8%D8%B7">change</a> the operation of the government bodies regulating the market and upholding consumer rights; the number of inspectors should be increased and they should be better paid to reduce the incentive for corruption.</p>
<p dir="ltr" style="text-align: justify;">2. Price stabilization</p>
<p dir="ltr" style="text-align: justify;">The government should put an end to the arbitrary pricing mechanism and instead cap profit margins.</p>
<p dir="ltr" style="text-align: justify;">The Hungarian experience is <a href="https://www.hungarianconservative.com/articles/current/price_monitoring_system_grocery_foodstuffs_mandatory_discounts_reduced_prices/">instructive</a> here. Digital databases of indicative prices of goods can be developed to increase awareness of prices and thus encourage suppliers to reduce them.</p>
<p dir="ltr" style="text-align: justify;">The Central Bank <a href="https://www.atlanticcouncil.org/blogs/menasource/why-inflation-is-so-high-in-egypt/">should</a> also set an inflation ceiling and adjust interest rates accordingly, <a href="https://www.atlanticcouncil.org/blogs/menasource/why-inflation-is-so-high-in-egypt/">following the lead</a> of Ghana, Kenya, and Chile. Experience has demonstrated the <a href="https://aps.aucegypt.edu/en/articles/778/fighting-inflation-fiscally">failure</a> of attempting to fight inflation by raising interest rates.</p>
<p dir="ltr" style="text-align: justify;">3. Increasing local production and reducing imports</p>
<p dir="ltr" style="text-align: justify;">Local production should be <a href="https://aps.aucegypt.edu/en/events/110/open-panel-discussion-at-aps-on-poverty-figures-in-egypt-an-inflation-driven-increase">encouraged</a> by improving financial incentives and accommodations for producers and farmers. Action must also be taken to <a href="https://www.fao.org/3/i2330a/i2330a05.pdf">create</a> a fair, competitive market to encourage small producers (especially young people and women) to enter the market, erode monopolists&rsquo; control of food commodity markets, and meet local demand.</p>
<p dir="ltr" style="text-align: justify;">4. Social support and protection</p>
<p dir="ltr" style="text-align: justify;">In the short term, the government should <a href="https://aps.aucegypt.edu/en/events/110/open-panel-discussion-at-aps-on-poverty-figures-in-egypt-an-inflation-driven-increase">increase</a> budget allocations for supply cards and the Karama and Takaful programs in order to support the neediest families during periods of inflation.</p>
<h2 dir="ltr" style="text-align: justify;"><img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1700400675imageEd. 48_En 4.png" alt="" width="546" height="308"></h2>
<p dir="ltr" style="text-align: justify;">In the long term, the state should improve social protection networks by <a href="https://aps.aucegypt.edu/en/articles/672/background-paper-social-protection-and-gender-in-the-imf-egypt-programme">channeling</a> the resources gained by the reduction of gas subsidies to these networks, rather than using them to achieve a primary budget surplus or service the debt. Improving public services like education and transportation will also alleviate the impact of the crisis on the citizenry.</p>
<hr>
<h2 dir="ltr"><span style="color: rgb(6, 71, 137);"><strong>Why Are the Blackouts Still Happening?&nbsp;</strong></span></h2>
<p dir="ltr" style="text-align: justify;">According to&nbsp;<a href="https://www.sis.gov.eg/Story/267073/%D9%85%D8%AA%D8%AD%D8%AF%D8%AB-%D8%A7%D9%84%D9%88%D8%B2%D8%B1%D8%A7%D8%A1-%D9%8A%D9%88%D8%B6%D8%AD-%D8%A3%D8%B3%D8%A8%D8%A7%D8%A8-%D8%B2%D9%8A%D8%A7%D8%AF%D8%A9-%D9%81%D8%AA%D8%B1%D8%A9-%D8%A7%D9%86%D9%82%D8%B7%D8%A7%D8%B9-%D8%A7%D9%84%D9%83%D9%87%D8%B1%D8%A8%D8%A7%D8%A1?lang=ar">Sameh al-Khishin</a>, the official spokesman for the Prime Minister&rsquo;s Office, power outages made a comeback - albeit for longer than their summer predecessors - due to the exceptionally high temperatures for this time of the year, in addition to the war on Gaza. Right after the war, gas supplied to Egypt from abroad had dropped from 800 million cu ft a day to zero.</p>
<p dir="ltr" style="text-align: justify;">The statement contradicted <a href="https://www.youm7.com/story/2023/3/7/%D9%88%D8%B2%D9%8A%D8%B1-%D8%A7%D9%84%D9%83%D9%87%D8%B1%D8%A8%D8%A7%D8%A1-%D9%84%D9%80-%D8%A7%D9%84%D9%8A%D9%88%D9%85-%D8%A7%D9%84%D8%B3%D8%A7%D8%A8%D8%B9-%D8%B2%D9%85%D9%86-%D8%AA%D8%AE%D9%81%D9%8A%D9%81-%D8%A7%D9%84%D8%A3%D8%AD%D9%85%D8%A7%D9%84-%D9%84%D9%86-%D9%8A%D8%AA%D9%83%D8%B1%D8%B1/6106612">assertions</a> by other officials that electricity production has been witnessing an unprecedented boom since the beginning of this year, highlighting the urgent need for planning that is more sustainable and better able to adapt to unanticipated events.</p>
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1700399912imageEd. 48 2_En 1.png" alt="" width="546" height="465"></p>
<h3 dir="ltr"><strong>Why is the state still producing electricity the traditional way?&nbsp;</strong></h3>
<p dir="ltr" style="text-align: justify;">In 2014, the Egyptian government decided to invest in conventional power plants&mdash;a planning misstep given that Egypt was a <a href="https://aps.aucegypt.edu/en/articles/1153/egyptian-natural-gas-sizable-investments-uncertain-returns">net importer of gas</a> at the time and facing growing consumption and a lack of local production. <a href="https://www.youm7.com/story/2023/3/7/%D9%88%D8%B2%D9%8A%D8%B1-%D8%A7%D9%84%D9%83%D9%87%D8%B1%D8%A8%D8%A7%D8%A1-%D9%84%D9%80-%D8%A7%D9%84%D9%8A%D9%88%D9%85-%D8%A7%D9%84%D8%B3%D8%A7%D8%A8%D8%B9-%D8%B2%D9%85%D9%86-%D8%AA%D8%AE%D9%81%D9%8A%D9%81-%D8%A7%D9%84%D8%A3%D8%AD%D9%85%D8%A7%D9%84-%D9%84%D9%86-%D9%8A%D8%AA%D9%83%D8%B1%D8%B1/6106612">Promising</a> that power outages were a thing of the past, the state built new power plants, <a href="https://www.cabinet.gov.eg/News/Details/65146">85% of which</a> rely on fossil fuels, despite Egypt&rsquo;s sizable potential to generate electricity from wind and solar energy. As of fiscal year 2020/21, Egypt had the capacity to generate the equivalent of 58,818 mw of electricity with renewables.</p>
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1700400011imageEd. 48 2_En 3.png" alt="" width="546" height="432"></p>
<p dir="ltr" style="text-align: justify;">But it looks like Egypt will find it difficult to meet its clean energy goals, with analysts projecting that it will <a href="https://w3.windfair.net/wind-energy/pr/42571-globaldata-egypt-wind-power-target-renewable-energy-shortfall-market-energy-generation-production-solar">fall short</a> of its <a href="https://www.globaldata.com/store/report/egypt-power-market-analysis/">2035</a> targets by 15%.</p>
<p dir="ltr" style="text-align: justify;">Inefficient planning and high global energy prices have contributed to this year&rsquo;s crisis, spurring the government to institute controlled blackouts.</p>
<p>&nbsp;</p>
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1700400096imageEd. 48 2_En 4.png" alt="" width="546" height="432"></p>
<h3 dir="ltr"><strong>The following factors have also contributed:&nbsp;</strong></h3>
<ul>
<li dir="ltr" aria-level="1">
<p dir="ltr" style="text-align: justify;" role="presentation">The government continues to export domestic gas in its quest for hard currency. Although it announced that it would stop exporting gas during the summer months, <a href="https://aps.aucegypt.edu/en/articles/1153/egyptian-natural-gas-sizable-investments-uncertain-returns">data</a> from the Central Bank indicates otherwise.&nbsp;</p>
</li>
<li dir="ltr" aria-level="1">
<p dir="ltr" style="text-align: justify;" role="presentation">The <a href="https://webcache.googleusercontent.com/search?q=cache:ZS0QeXG-8uAJ:https://www.madamasr.com/ar/2023/09/09/feature/%25D8%25A7%25D9%2582%25D8%25AA%25D8%25B5%25D8%25A7%25D8%25AF/%25D8%25AD%25D9%2588%25D8%25A7%25D8%25B1-%25D9%2588%25D8%25B2%25D9%258A%25D8%25B1-%25D8%25A7%25D9%2584%25D8%25A8%25D8%25AA%25D8%25B1%25D9%2588%25D9%2584-%25D8%25A7%25D9%2584%25D8%25A3%25D8%25B3%25D8%25A8%25D9%2582-%25D8%25A3%25D8%25B3%25D8%25A7%25D9%2585%25D8%25A9-%25D9%2583%25D9%2585%25D8%25A7%25D9%2584-%25D8%25B9%25D9%2586/&amp;hl=en&amp;gl=eg">termination</a> of the protocol signed with Saudi Arabia in October 2022 to <a href="https://www.facebook.com/photo/?fbid=699711418864044&amp;set=pcb.699714118863774">supply</a> Egypt with petroleum products&mdash;especially mazut&mdash;for a period of five years, followed by a government <a href="https://www.cabinet.gov.eg/News/Details/65146">decision</a> in April 2023 to halt mazut imports and rely on local production, a decree that the government subsequently rescinded.</p>
</li>
<li dir="ltr" aria-level="1">
<p dir="ltr" style="text-align: justify;" role="presentation">The shrinking role of the private sector: Yassin Abd al-Ghafour, the president of Solar Egypt, told APS that Egypt lacks the legislation needed to incentivize the private sector to operate effectively in the electricity sector. His firm faces unfair competition from major foreign companies, despite its success in the field of clean energy.</p>
</li>
</ul>
<h3 dir="ltr"><strong>How can planning be made more efficient?</strong></h3>
<ul>
<li dir="ltr" aria-level="1">
<p dir="ltr" style="text-align: justify;" role="presentation">Provide all accommodations to encourage the domestic private sector to invest in the renewable energy sector; lift any administrative or customs barriers to help the sector expand and create new jobs; and localize new technology. As part of these measures, the government cap on the use of renewable energy&mdash;set at 40% in 2021&mdash;should be <a href="https://hapijournal.com/2023/11/05/%D8%A3%D8%AD%D9%85%D8%AF-%D9%86%D8%AC%D9%8A%D8%A8-%D8%AD%D8%AF%D9%88%D8%AF-%D8%A7%D8%B3%D8%AA%D8%AE%D8%AF%D8%A7%D9%85%D8%A7%D8%AA-%D8%A7%D9%84%D8%B7%D8%A7%D9%82%D8%A9-%D8%A7%D9%84%D9%85%D8%AA%D8%AC/">eliminated</a>, as it hinders companies seeking to expand solar power plants to all productive and service sectors; customs duties on imported solar panels must also be <a href="https://arabic.cnn.com/business/article/2022/01/06/egypt-solar-panels-tax">lifted</a> because it increases the cost of establishing solar farms.</p>
</li>
</ul>
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1700400173imageEd. 48 2_En 5.png" alt="" width="546" height="126"></p>
<ul>
<li dir="ltr" aria-level="1">
<p dir="ltr" style="text-align: justify;" role="presentation">Concentrate on attracting foreign investments in the renewable energy sector, taking advantage of the huge potential for solar and wind energy in Egypt, and permanently suspend any investments in traditional power plants. This can be done through <a href="https://www.un.org/esa/sustdev/documents/16wohl.PDF">financial incentives</a>, tax exemptions, special banking or customs treatments.&nbsp;</p>
</li>
<li dir="ltr" aria-level="1">
<p dir="ltr" style="text-align: justify;" role="presentation"><a href="https://www.mdpi.com/1996-1073/13/4/788">Incentivize</a> donors to invest in small renewable energy projects on the local level by <a href="https://www.un.org/esa/sustdev/documents/16wohl.PDF">creating</a> solutions for financing risks. This can only be done by guaranteeing appropriate profits for companies, which requires the state to offer them with preferential treatment, particularly when they compete on other large projects.</p>
</li>
</ul>
<hr>
<p><em><a href="https://aucegypt.us17.list-manage.com/subscribe?u=5e42bef7fee7e6a299c3d932d&amp;id=e0d95df1c1&amp;mibextid=Zxz2cZ">Subscribe to the weekly edition&nbsp;</a></em></p>
<p style="text-align: justify;"><em>"Adasa" is a weekly policy digest by Alternative Policy Solutions. "Adasa" provides an analysis of a select number of policy developments and their effect on inclusive development and socioeconomic change.</em></p>

عدسة

Adasa

السياسة النقدية

Monetary Policy

الطاقة

Energy

حماية اجتماعية

Social Protection

الطاقة المتجددة

Renewable Energy

السياسات الاقتصادية

Economic Policies

كيف تخطط الحكومة لمحاربة التضخم وأزمة الكهرباء؟

How is Government Planning on Bringing Prices Down and Increasing Electricity?

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