Speaking recently about the rise in the prices of some consumer goods, Commerce Minister Dr. Hashim Yamani gave a number of reasons for the increases. He attributed the rise to an increase in the cost of maritime shipping, the rising cost of producing consumer products and the rising cost of the raw material used in the production of some consumer goods in the Kingdom, including packaging and chemical materials. The increase in consumer goods prices ranged from three to seven percent, according to estimates made public last month.
While agreeing with the minister that there indeed has been a rise in the prices of some consumer goods, his justification of the increase and the reasons he cited did not reflect the reality. The reality is a simple one: The increase in the prices of consumer goods can, to a large extent, be attributed to a fall in the value of the Saudi currency, the riyal, against most foreign currencies, especially the euro.
According to statistics by the Saudi Arabian Monetary Agency (SAMA), since the year 2000, the riyal has been steadily falling against other world currencies. The drop in its value against the euro has been 46.3 percent, against the Norwegian kroner 46 percent, against the Swiss franc 44 percent, against the sterling pound 24.5 percent and against the Japanese yen 10.4 percent. None of these currencies are linked to the dollar, which means the value of the riyal has also dropped against these currencies.
The increase in consumer prices naturally reflects a fall in the value of the riyal against all these currencies. For example, the prices of medicines imported from Europe by the Ministry of Health went up by 38-40 percent during the same period. The price of rice imported from India increased 20-30 percent as published in local papers. The increase in the prices of other consumer goods was put at 15 percent.
This difference between what has been said by the minister and the reality on the ground means there may well be no attempts to address the problem. Consumers continue to suffer, spending one-third of their monthly salaries that have been frozen since the boom days. We should do what all other countries do to address this situation: Link wages to inflation and other fluctuations in the price of imported goods. One of our neighbors, the United Arab Emirates, which is also an importer of most of its requirements, has done exactly that.
