During the end of the year 2006, Saudi Arabia’s inflation was just above 2 per cent, as per latest data the inflation increased rapidly to a 27-year high of 8.7 per cent in February 2008. The government has declared that it would cut duties on 180 goods including frozen poultry, dairy goods, vegetable oils and building materials, from about 20 per cent to 5 per cent.
The Saudi kingdom largely consists of middle and lower-income group and inflation was a strange phenomenon until recently to the people. Saudi Arabia’s food supplies and other essential commodities are imported, the soaring global prices of commodities have added to the woes of the people. Hence, the government has decided to bring about duty cuts and expects prices to come down quickly.
Similarly, Egypt’s trade and industry minister, Rachid Mohamed Rachid told the press that their government would remove customs tariffs on food items, including edible oils, dairy products, and steel bars, which have duties ranging from 5 to 7 per cent, in the coming days. He said these measures are to check the inflation which has reached more than 12 per cent in February.
It is widely perceived as a move to allay fears concerning social discontent, in a country where one in every five people cannot meet basic amenities. However, the current duty cuts may threaten the four-year economic reform program that has been lauded by the business community, but has not made substantial change to the lives of the common people.
Other Arab states too followed suit by responding to the inflationary call by hiking the salaries of their civil servants. On the contrary, the migrant workers are seriously affected by the price hike of the commodities because their pay checks have not undergone any change.
Recently, the government of Egypt has clamped a six month ban on cement exports to sustain its infrastructural growth. Rice exports too have to confront with the same fate, despite Egypt being projected as an export hub. Egypt has to encounter greater challenges compared to other rich Arab nations, due to its 80m strong population and relatively low per capita income.