Foodstuffs’ prices skyrocket, currency power fluctuates [Archives:2005/857/Business & Economy]

July 7 2005

SANA'A- These days, the Yemeni street experiences an unprecedented increase in the prices of main foodstuffs including sugar, infant milk, dairies, rice, wheat, oil, medicine and other essential commodities.

The inflation wave came in a time when people all over Yemen are waiting for the application of sales tax law by the government, and this is strongly opposed by large number of traders, who hold the view it will magnify the economic recession of the country.

Large numbers of citizens have shown fear and concern over the shocking price hike, saying such a phenomenon implies a dose reform to be passed on.

They feared the government's application of a new dose, mainly as the government intends to lift subsidy on oil derivatives. This will help raise prices of foodstuffs, other basic commodities and transportation fares.

The capital's Chamber of Trade and Industry (CTI) denounced the campaign waged by the official media against the private sector accusing it of standing behind the price hike.

The CTI said in a statement distributed to different media means last week: “the rising price of foodstuffs is attributed to the increase in the price of oil, sea transportation fares as well as the increase in sea transportation insurance fees.

The CTI said the deterioration of the Yemeni currency against the dollar and the series of reforms implemented by the government caused this inflation. It expressed concern over this unprecedented inflation and the financial policies adopted by the government and confirmed the private sector will be the first victim to be harmed and affected by the price hike and it is bound to suffer heavy losses.

In the same context, the CTI continues its strong objection to the sales tax due to be passed on this month. It held a variety of activities, the last of which was a press conference last week in which Bashamakh, Chamber of Trade and Industry Chairman confirmed the inflation will destroy the national economy and demanded the government to reconsider the matter.

He warned of tragic consequences since such reforms may cause popular uproars across the country.

Around 18 commercial and industrial chambers and associations appealed to the President of the Republic to invalidate the unconstitutional texts in the sales tax law as well as to cancel the latest decisions issued by the Central Bank of Yemen and the proposal of investment law amendments that may cause comprehensive economic catastrophe all around the country.

These societies confirmed the economic situations have experienced a recession since 2000 leading to increasing poverty and the unemployment rate. They added such situations will never attract foreign investors to make business in Yemen but it will oblige the national capital to be invested abroad.

The commercial associations pointed out that the private sector employs around 4 million workers while around 800 thousand civic employees have government jobs, costing 70% of the State's general budget.

The private sector constitutes up to 83% of the gross domestic production.

Regarding procedures expected to be taken by the government to stop prices from going high, Mohammad Ahmad Ghalib Deputy Chairman of Tax Authority told the media: “the State depends on the policy of free economy and does not allow any trade activities except what is stipulated by the laws of fighting cheat and monopoly.”

He added: “in the shadow of competition, the citizen looks for the cheapest and highest quality commodities, emphasizing the government will not profit from such reforms.”

Mr. Ghalib further noted, “I believe that reducing taxes to this minimum will help restrict tax evasion even if the Public Treasure experienced a loss in the short run, and such a reduction is expected to leave a positive effect on the level of the macro economy in the long and short terms.”

The Cabinet decided last week to reduce the tariff on different commodities to 5%, and it already brought down the tax sale tariff from 10 to 5%. It also welcomed proposals of the Parliament to raise salaries of government employees, and that YR 20000 will be the lowest salary at the government's job ladder.