Dubai’s livestock market, where dozens of pens are tightly packed with Syrian sheep and Iranian goats, was teeming on Tuesday as Muslims prepared for Eid al-Adha, when families slaughter an animal for a banquet of meat and rice in commemoration of Abraham’s willingness to sacrifice his son.
However, traders say, the picture is misleading. The number of customers in the run-up to Wednesday’s festival has fallen by a quarter as livestock prices have risen 30 per cent on rising global food and transport costs, compounded by limited supplies because of outbreaks of disease in east Africa.
Record oil prices may have flooded the region with petrodollars but rampant inflation is eating away at disposable income.
Apart from rent, food is the main driver behind historically high inflation of 5 per cent in Saudi Arabia, the region’s most populous country, and inflation rates of more than 10 per cent in the UAE and Qatar.
In Dubai, it is now impossible to get a scrawny Somali goat for less than $100 (€70, £50), let alone a magnificent specimen from Rajasthan, which costs more than $400.
“The Indian goats look and taste the best but they cost three times as much as back home,” said Karamath Sheikh, an Indian visiting Dubai for the holidays.
Mr Sheikh says connoisseurs will, nonetheless, choose the pricey castrated khasi goat for its temperament and taste over the uncastrated, aggressive andul, which “is always on heat, dangerous and partakes in male-on-male sex”.
The cost of rice on which the traditional meal of ouzi is served has also shot up as India’s nouveau riche consume more high-grade basmati. And recent bird flu outbreaks in Saudi Arabia and India have caused egg shortages, prompting regional supermarkets to introduce rationing.
At the same time, the slide of the dollar – to which many Gulf states peg their currencies – has increased the cost of importing goods from non-dollar economies.
Deteriorating expatriate spending power is also starting to pray on the minds of the region’s decision-makers. For example, the weakness of the dollar triggered recent strikes in Dubai that ended with 20 per cent wage increases for some south Asian labourers.
John Sfakiankis, economist with HSBC’s Saudi affiliate Sabb, says food inflation has played an increasing part in public discourse over the past few months. While most Saudis will still be able to sacrifice an animal this year, he says many will choose cheaper, imported meat rather than prized domestic livestock.
Mr Sfakiankis is forecasting 5 per cent year-on-year Saudi food inflation in 2007, rising to 6 per cent next year. Kuwait has seen food price rises of as much as 25 per cent in recent months.
“The more inflation has a social impact, the greater the response from governments,” says Monica Malik, an economist with investment bank EFG-Hermes.
In Saudi Arabia, for example, she says recent subsidies on baby milk and medicines could be broadened to assuage popular concern at the rising cost of daily staples. Some private sector companies have already boosted wages, prompting calls for similar rises for public sector workers who eye, enviously, raises of up to 70 per cent given to their regional counterparts.
Gulf leaders this month agreed to maintain the peg to the dollar, despite concerns about the policy in inflation-afflicted states such as the UAE and Qatar.
Sultan al-Suwaidi, the UAE central bank governor, says revaluation remains an option. Ms Malik agrees that the UAE may allow the dirham to appreciate 3-5 per cent in the first half of 2008.
That would not provide immediate help for Issa Hamad, a Sudanese trader who could not import his livestock this year due to an outbreak of Rift Valley fever. But it could ease sentiment among consumers, many of whom are avoiding the traditional Eid foray to the market. “People are suffering from these prices,” he says.