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UAE body calls for food subsidies as prices surge

By Agencies


A United Arab Emirates consumer protection body said on Wednesday it had urged the government to subsidise basic food items as part of measures to curb food price rises, which it expects to reach 40 per cent this year.

The Emirates Society for Consumer Protection is asking the government of the second-largest Arab economy to raise subsidies on rice, sugar, bread, milk and other basic foods, its executive manager Jamal Al Saeedi said.

Food prices in the UAE, which pegs its dirham currency to the weak US dollar, rose about 30 per cent in 2007, according to a survey conducted by the body, Saeedi said.

"I expect they will go up another 40 per cent this year," he told Reuters by telephone.

"The government needs to intervene. We made proposals two weeks ago and we are still waiting for a response," he said.

Inflation in the UAE hit a 19-year high of 9.3 per cent in 2006, and probably accelerated to 10.9 per cent last year on surging rents, National Bank of Abu Dhabi said last week.

Food price inflation is partly driven by the dirham's peg to the dollar, which hit record lows against the euro and a basket of major currencies this week, Saeedi said.

Rising costs for labour, rents and government fees have also forced retailers to pass through price rises to consumers, he said.

"The dirham has fallen against the US dollar and 85 per cent of the food ... is imported," Saeedi said.

The proposals -- which also include a call for tighter controls on rent increases -- were submitted to the Higher Committee for Consumer Protection, which will consider them at its next meeting, Saeedi said.

While Dubai and Abu Dhabi have put ceilings of 5 per cent per year on how much landlords can raise rents, many landlords are "cheating", Saeedi said.

Rents jumped about 18-19 per cent and food prices about 8 per cent last year, NBAD said in its note.

Like most countries in the world's top oil-exporting region, the UAE is constrained in its fight against inflation by the dollar peg that forces it to track US monetary policy when the Federal Reserve is cutting interest rates to ward of recession.

By contrast, Gulf economies are surging on a five-fold jump in oil prices since 2002.

Businesses in the UAE have been complaining about rising costs and migrant construction workers rioted in Dubai in November to demand pay rises to compensate for savings lost due to the dollar's slide.

The Ministry of Economy warned suppliers in November against raising prices of goods and services in an "unjustified" manner to take advantage of a 70 per cent increase in federal government wages this year. (Reuters)