Sharp fluctuations in commodity prices, why? [Archives:2007/1049/Business & Economy]

May 10 2007

By: Raidan Al-Saqqaf
[email protected]

Perhaps it is not price fluctuation, but continuous hikes in the prices of commodities are the subject of this business report; apparently there is some sort of correlation between government's decisions to stabilize prices and the ever increasing prices of necessary commodities and foodstuff.

Prices have once again increased, and people continue to question if anything, that is everything, which the government does in this regards is sincere or effective, and how should the people deal with the ineffectiveness of the government. It is a question of how to cope up with the increasing prices and how to survive this never-ending inflation.

One of the government's solutions is to compensate government employees and affiliates with a specified amount of money labeled as the anti-inflation assistance, a monthly stipend in addition to the salary, usually ranging from 5 – 20 percent of the principle salary. On the other hand, the ministry of trade and industry has formulated a mechanism in order to monitor retail prices, a promising notion which has been publicized for some time and was a part of the government's agenda to regulate prices and take measures against greedy wholesalers and retailers, whose margins are believed to be over-inflating and causing the increases in prices.

The concept of a free market, in order to succeed, has to be based on competition, however, considering that obscure oligopoly of commodities importers in Yemen, the government has to interfere and ensure fair and suitable prices for the consumers, even if the government has to subsidize some of these commodities, it is the right of the people to have access to food, and it is the role of the government to ensure that people can afford to buy food.

Recently I was speaking to my neighborhood retailer on the subject of price increases, where he has shown me a blue pamphlet indicating that the Tax Authority is coming soon in order to tax him, as he falls within the category of tiny and under-tiny enterprises, he said that now he will have to convince the committee which will visit him to decide how much tax he should pay, that his business barely breaks even, and if they ask him to pay more taxes, then he will have to raise his prices and charge his neighbors more than they can afford, and hence, they will be unable to buy the same foodstuffs and the same food quantities as they used to buy.

Why are prices increasing? Are the market powers of demand and supply behind this? Aren't there enough importers who bring in foodstuff, or is the population growth with the increasing number of mouths to be fed coercing every family to buy more rice and more wheat everyday?

Or is it that the new finance minister, who used to be the director of the tax authority and the engineer behind the on-going campaign to increase tax, involved directly in the fluctuations?

It is my theory that the decision to appoint the new finance minister is due to his agenda to increase the government's tax revenues, instead of curbing the unnecessary government expenditures, such as the one that is spent on war, and focusing more in generating new sources of revenues.

What is the problem here? Isn't The State's duty to help its citizens live in a good life? (Aristotle), then what it is doing here (in Yemen) is raising taxes even on the tiniest entrepreneur who is struggling to break even and spending millions of dollars on war while begging the international community for more aid and support. It also uses its own resources for unconstructive means.

Just to point out; A Sack of wheat was 3100 Riyals a month ago, now it is 4000; a sack of rice was 3400 Riyals, now it is 4200; and a kilo of powdered milk was 500, and now it is 600.