Egypt lifts tariff on sugar imports

Theodore May
3 Min Read

CAIRO: Prime Minister Ahmed Nazif announced this week that Egypt would temporarily suspend the tariffs it had imposed on sugar imports, a move likely to boost supply locally.

Up until Nazif issued the decree, tariffs on raw sugar stood at 2 percent and those on processed sugar were 10 percent.

Egypt imported 31,000 tons of sugar in the first half of 2009 – a number which is likely to increase in the coming months.

Global raw sugar prices have risen sharply in the past several months. The cost of a pound of sugar, now 22 cents, is up 65 percent from January of this year when it hovered just above 13 cents. Refined white sugar prices were up 59 percent over the same period.

“The sharp increase in international sugar prices witnessed over the recent period is due to a shortage in global sugar supply in central markets such as India, Brazil and Thailand, which underwent unfavorable weather conditions; hence, negatively affecting their harvesting seasons, wrote Beltone Financial in a note.

Through careful price management, though, the Egyptian government, via its Sugar Committee, was roughly able to keep domestic prices stable.

Also largely responsible for the stability of prices was that many of the country’s largest sugar producers, including giant Delta Sugar, had negotiated contracts before the dramatic upsurge in international prices.

As new contracts are negotiated, Egyptian consumers have seen sugar prices creep upwards.

By eliminating customs on sugar imports, though, companies like Delta Sugar are likely to face stiffer competition here at home, just as they begin to recoup recent losses. The tariff exemption, though, is only in place through the end of the year.

“We expect the company’s remaining inventory to be sold at least LE 3,500, which should ultimately allow Delta Sugar to end the year with a net profit of LE 109 million, wrote Beltone.

Especially since the food shortages that struck the country last year, the government has been anxious to keep food prices in check. At its last monthly meeting, the Central Bank’s Monetary Policy Committee, which sets interest rates, said it is keeping a wary eye on food price inflation as it continues to slash rates in an effort to stimulate growth.

According to local media, Finance Minister Youssef Boutros-Ghali said that the decision to facilitate more sugar imports was part of an effort to protect the lowest economic classes from higher prices.

According to data released by the Ministry of Trade and Industry, sugar imports had historically been constant, around $150 million per year. That number jumped in 2008 to $573 million.

Extra tariffs imposed at the beginning of this year, though, again reduced sugar imports, in part as a means of protecting local producers.

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