The decline in the price of Bitcoin and the rise in the dollar raise fears of high prices in Egypt

The price of the cryptocurrency Bitcoin fell 5.11 percent to $75,057.41 on Tuesday, on track to record the largest daily percentage decline since June 2, amid a wave of risk aversion in the markets.

The largest cryptocurrency decline in terms of market value comes with a decline in high-risk assets, while investors await the Federal Reserve's decision on interest rates, amid the rise in US Treasury bond yields to high levels.

Bitcoin rose in August before falling again in September, after expectations of higher interest rates and the strength of the dollar affected investors' appetite for crypto-assets.

The US currency exceeded the barrier of 52 Egyptian pounds for the first time in 3 months, in a new rise that would exacerbate high prices and confuse the markets.

The rise in the price of the dollar usually raises fears of an increase in commodity prices in the markets. Before the outbreak of the Iran war at the end of last February, the price of the dollar was about 47 pounds, and as the war continued, it recorded record levels exceeding 54 pounds, then it fell below 49 pounds in April before rising again.

Egyptian markets witnessed fluctuations in basic commodity prices on Tuesday. While the prices of some of them, such as poultry, beans, lentils, flour, and cheese, rose to varying degrees, the prices of other commodities, such as rice, pasta, and oils, stabilized, while a clear discrepancy emerged in the price of one commodity in the markets.

Mahmoud Al-Asqalani, head of the Citizens Against High Prices Association for Consumer Protection, a civil society association, says that when the dollar rises, the prices of most goods increase “after one minute, and the markets are quickly affected.”

He added to Asharq Al-Awsat: “The Egyptian market tends to increase prices quickly, while it does not recognize the reduction if the currency price decreases. This reflects a clear defect, as the increase must be proportional to the rise in the cost of production, whether affected by the exchange rate or any other factors.”

The annual inflation rate in Egyptian cities recorded 14.5 percent last August, compared to 14.9 percent in July, according to data from the Central Agency for Public Mobilization and Statistics.

The head of the Rice Division of the Federation of Egyptian Industries, Rajab Shehata, attributed the stability of the price of rice in the markets on Tuesday, despite the rise in other commodities, to the “abundance of local production.” He told Asharq Al-Awsat: “Rice prices are stable in the Egyptian markets, and any increase will be in the price of imported rice. Therefore, the price of rice is not affected by the dollar.”

Attempts to contain high prices

The government seeks to contain the high prices crisis through an initiative it launched last week, which extends for six months to “pump basic commodities at reduced prices” with the aim of controlling markets.

According to the Ministry of Supply, the first phase of the initiative includes the offering of 12 basic commodities at reduced prices, with the expansion gradually taking place by adding 18 other commodities, bringing the total of commodities offered to 30 commodities.

Prime Minister Mostafa Madbouly reiterated the importance of continuing the efforts of various concerned parties, which contributes to making goods available in appropriate quantities and prices.

During his meeting with members and officials of his government, on Tuesday, he stressed “the importance of continuing to implement plans aimed at expanding various fixed and mobile outlets for the sale of goods, through cooperation and coordination with various concerned authorities,” noting that “this would contribute to greater stability in market movement and price control.”

As part of the initiative to supply basic goods at reduced prices, the Minister of Supply, Sherif Farouk, opened, on Tuesday, 20 new branches of the government store chain “Carry On”, bringing the number of its branches to 24 branches.

In addition to the rise in the price of the dollar, economist Wael Al-Nahhas listed other factors for the rise in prices, including the start of school, which coincides with the presence of purchasing power for some goods that students need, whether food or school, which leads to the movement of many goods.

Other factors

Another factor, according to Al-Nahhas, is “anticipation of the government’s decision to raise fuel prices, which is usually followed by another wave of high prices, which is expected to be more severe.”

Last week, Fitch Solutions, an economic research firm, expected an increase in fuel prices in Egypt this month, and said that the Egyptian government seeks to achieve the financial goals of the general budget that began last July, “which means resorting to reducing spending on fuel.”

The government decided to increase fuel prices last March by rates ranging between 14 and 30 percent for gasoline, automobile gas, and domestic and commercial gas cylinders.