Wednesday 9 April 2008

Revolution is the price of bread

Emirates Business 24/7 magazine warns of the dangers of food prices rises in the Arab world:

From Cairo in Egypt to Sanaa in Yemen, mostly authoritarian governments have to weigh the fiscal costs of subsidising fuel and food against the explosive political risks of social discontent.

"Nothing's inexpensive any more," griped Jihad Al Amin, who owns a dry-cleaning store in Damascus, Syria. "Even parsley, which has been dirt cheap for as long as I can remember, has tripled."

In the UAE and Bahrain, the combination of rising prices and falling dollar purchasing power has sparked riots and protests by migrant workers, many of whom live in squalor among the skyscrapers and sports car showrooms.

Inflation has jumped across the region. In Saudi Arabia, the yearly rate hit 8.7 per cent in February, a 27-year high.

Food prices in Syria have risen 20 per cent in the last six months. In Yemen, one of the Arab world's poorest countries, the price of wheat has doubled since February, while rice and vegetable oil have gone up 20 per cent in two months.

Consumers face tough choices as food takes a bigger chunk of family budgets, perhaps leaving less for health and education.

In Lebanon, Central Bank governor Riad Salameh said the purchasing power of the Lebanese was a "major concern" after it declined 10 to 15 percent last year due to higher oil and commodity prices and the dollar's weakness against the euro.

Pierre Zoghbi, managing director of Mainspring, a food and beverage supplier, said prices of imported food, including dairy products, had risen 145 per cent since late 2007.

The response from Arab governments has varied.

Several Gulf oil producers have tempered the impact of higher food and housing costs by raising wages of their nationals—at the risk of fuelling domestic inflation.

But many Saudis were disappointed by a 5 percent wage hike for public employees in January after Gulf neighbours had already increased salaries by bigger margins.

Countries like Egypt, Syria and Yemen—all modest oil exporters whose output is declining—are straining their budgets by maintaining subsidies deemed vital to their people.

Jordan, unable to meet the cost, removed fuel subsidies in February, sending diesel and kerosene prices up 76 percent overnight. The government is promising to soften the impact with public sector wage increases and social safety nets.

In Egypt, where more than 14 million people live on less than $1 a day, inflation jumped to an 11-month high of 12.1 percent in February, largely due to rising food prices.

For decades, Egypt has provided cheap bread to its working poor to help them survive and to ward off discontent. This year queues for subsidised bread have lengthened, tempers have flared and 11 Egyptians have died in the lines since early February.

Picture: Women in Petrograd, Russia, attack a bakery during the bread riots of 23 February 1917—day one of the revolution.

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