International

null
Emilio Morenatti/AP
A Nepalese worker carries a sack of rice in a government warehouse in Katmandu, Nepal.

Price Spikes, Panic Buying Give Rise to Black Market for Rice

July 08, 2008 07:02 AM
by Anne Szustek
Rice from supermarkets in the UAE is being resold at a premium on local street corners in the face of government-instituted price controls.

30-Second Summary

facebook
Export restrictions of the dietary staple by major rice-producing nations and inflation in excess of 11 percent pushed the federal government of the United Arab Emirates to ink agreements with several grocery chains to set ceilings on food prices.

The Emirates Society for Consumer Protection is pushing the UAE to provide further financial backing to curb price rises for basic food items. The organization predicts inflation for staple food items to hit 40 percent this year. Rice importers in the Gulf Arab country are asking for subsidies of at least 25 percent to help keep business afloat.

The government adheres to a no-subsidy policy, however, and grocers’ rice inventory is expected to be in deficit until at least next month. A black market has since emerged to meet the gap, selling Indian and Pakistani rice to the country’s large South Asian expatriate population at a premium of as much as 20 percent.

Housewife Shama Chaurasia said, “Not everyone knows about black market dealers as the government is keeping a close eye on them, but I don’t think the situation is getting any better soon.”

Further exacerbating global food price rises is the UAE’s currency peg to the U.S. dollar. According to The Wall Street Journal, the sluggish greenback “contributes 40 percent of total inflation” in the country.

After India announced that it would halt export of non-basmati rice, consumers rushed to supermarkets to stockpile the grain. A similar trend in California sparked a four-bag limit on rice per customer at Sam’s Club this spring. Prices for rice from Thailand, considered a benchmark for the grain, tripled in the UAE following the run on rice. At least 28 countries have installed quotas on food exports.

Headline Link: ‘Rice Black Market Hits UAE’

Background: Rice prices prompt trade restrictions, purchasing limits

Opinion & Analysis: The pains of price increases

Reference: The United Arab Emirates

Related Topics: UAE reconsiders dollar; rice prices threaten England’s Indian restaurants

facebook

Most Recent Beyond The Headlines