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Thursday, 12 May 2016

Egypt should raise prices gradually, Patrick Werr writes

Veteran finance writer Patrick Werr says Egypt should raise prices gradually, which should tame the shock element for the economy, he writes in The National yesterday. “In a best-case scenario, the government would free prices altogether and let supply and demand decide what products should cost. But if the government decides this is politically impossible, a second best solution would be to build in automatic increases based on the consumer price index, which seems to be a fairly accurate measure of inflation. The more gradual and frequent these price increases are, the better. Under current practice the government tends to do nothing for years, then as a financial crisis looms it hikes prices massively and suddenly.”

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