Price ceiling to fuel food supply crisis in UAE

The UAE Government's attempt to control the prices of essential goods by setting maximum retail prices could seriously affect the supply and quality of goods in the market, retailers warned on Saturday.

Leading food retailers in the country are expected to meet ministry officials this week.

The Ministry of Economy has issued a circular to retailers, a copy of which Gulf News has obtained, directing retailers nationwide to stay within the maximum retail price (MRP) bands prescribed by the ministry.

The circular sets maximum retail prices for commodities such as eggs, basmati rice, chicken and drinking water.

The setting of prices of these commodities above the MRP will result in a fine of Dh10,000, and hoarding will bring a fine of Dh20,000.

A cross-section of consumers in Dubai welcomed the move and said the MRP should be extended to all essential commodities. "Everything from red meat to detergent and bread has gone up in price. There should be a maximum price for those too," said Zaima Mustafa, an Omani national.

Many retailers, however, said the setting of prices on essential commodities would affect their supply and quality.

"The increasing prices of essential goods have been directly linked to increased production costs. Our suppliers are not willing to reduce prices," said Ashraf Ali M.A., executive director of Lulu Group.

Smaller supermarkets said if the MRP is strictly enforced they will not be able to stock most of the items.

According to Merrill Lynch, the exchange peg has become the main source of inflation. "Pegs to the sliding dollar not only import inflation and fuel domestic liquidity but also import easing monetary policy," said Turker Hamzaoglu, EMEA Macro and FI Strategist of Merrill Lynch.