In Egyptian Arabic, the word “bread” translates into eish, literally “living”. What other word can interpret the crucial significance of bread to the Egyptian?
No surprise then that when the government decided as of 1 June 2024 to raise the price of subsidised bread from 5PT (piastres) to 20PT a loaf, the vast majority of Egyptians—some 70 million out of a total 104 million Egyptians are on the subsidised bread system—felt the blow. [1 piastre is 1/100 of an Egyptian pound which equals around USD 0.0213]. Given the spiralling prices since 2020 that reflect the struggling economy of Egypt, the blow was indeed painful, especially that many counted it as a prelude to further raises in the price of subsidised bread and other commodities. The government claims that producing a loaf of subsidised bread costs 125PT. Noteworthy is that unsubsidised bread is freely available on the market, but at excessively higher prices.
The government made it no secret that, within the contest of necessary economic reform that would achieve a fully free market, subsidies—which cover the main commodities: bread, fuel, and power—should be phased out throughout the coming five years. True, the government said it aims at providing social support for needy families through cash subsidy not subsidy in kind, the former being supposedly more precise in targeting those who truly need it, but it is common knowledge the cash subsidies require an extensive data base that should take time to draw.
Public outcry
The Egyptian public has been vocal in deploring the rise in price of bread.
Mona, who works as a cleaner and is married to a pensioner, says that their family of five depends heavily on the 5PT-loaf quotas. “We now have to pay EGP20 to get the same quota of bread we used to get for EGP5. The three-fold rise is very painful,” she says.
A labourer, Abdel-Rahman, says that even if one can somehow accept the rise in price of bread, it is very hard to accept that the weight of a loaf has been unofficially reduced beyond the 90gm it is supposed to weigh. “A loaf is now smaller than the palm of a hand,” he grumbles. “Why doesn’t the government do its job and conduct inspections on bakeries that bake subsidised bread? Besides, our ration cards are not frequently updated to include newborns, and not all family members are included on the ration cards. The reasons for such exclusion are not clear,” he says.
MP Sanaa al-Said described the decision to raise the price of subsidised bread as “catastrophic”. She said she is questioning the government on how well-studied that decision was, and the scope of its impact on the sectors needing subsidy. “Lifting subsidies on bread, fuel, and power places needy families in impossible positions because it severely hampers their ability to provide the most basic of their needs.
Controversy arose among economic circles regarding the benefit of raising the price of bread, with many claiming that its impact on the national budget is minimal.
Minimal impact
Economy expert Abdel-Nabi Abdel-Muttaleb says that the price of subsidised bread in Egypt was raised 10 times during the interval from the mid-1970s to 1988; since then, it was maintained at 5PT a loaf. Yet, this price was not really kept constant, it was raised several times through reducing the weight of the loaf from an original 135gm to the current 90gm.
Dr Muttaleb deplores the fact that the price rise will have minimal impact on Egypt’s national budget. “Even if the entire bread and food subsidies are lifted,” he says, “it would deplete the budget deficiency no more than 3.3 per cent.”
Some may believe that the meagre sum of 20PT for a loaf of bread is no big deal for the public or the government, Dr Muttaleb says, yet it contributes to inflation and represents a huge burden on needy families.
A number of rights and legal movements took to the courts in attempts to force the government to go back on its decision.
A case was brought against the government before the State Council’s Administrative Court, the highest administrative court in Egypt, demanding that the government should halt the execution of the decision to raise the price of subsidised bread, and cancel it. Lawyer Amr Abdel-Salam says that the huge numbers of Egyptians that belong to the limited-income sector or those with almost no steady income are finding it impossible to live self-sufficiently. “Even so,” Mr Abdel-Salam says, “the government is not endeavouring to achieve the least of social justice by alleviating the burdens of needy families. Instead, it raised 300 per cent the price of the most basic commodity they need.” He described the decision as unconstitutional in that it hampers the constitutional right of Egyptians to “sufficient, healthy nutrition”.
“Citizens should share cost”
In response to all such outcries, spokesperson of the Supply Ministry Ahmed Kamal says that the bread production system of milling the wheat, storing the flour in silos, distributing it nationwide, and baking it into bread at the bakeries, remains as is where government expense is concerned. The revenue of the curtailed subsidy, he said, will go to the wheat growers. The price of wheat has been steadily increasing, Mr Kamal informed; the government paid EGP9 billion to local growers last April during the wheat harvest.
“The decision to raise the price of subsidised bread,” Mr Kamal said, “was taken in 2019, but global challenges led the government to postpone the decision.”
For his part, Chief of the Bakeries Sector at the Union of Chambers of Commerce, Abdullah Ghorab, says that the sale of subsidised bread has been going on smoothly since the price was raised. He claimed that the 20PT required for every loaf of bread is in itself an insignificant sum, yet the more costly subsidised bread will drive people to use it more rationally; in many cases that bread was notoriously used as fodder for chickens or cattle.
Alternatives
Given that economic reform requires free markets, and thus eliminating in-kind subsidies as such, a lot of talk has been going on lately on replacing in-kind subsidy with cash subsidy. Economy expert Mostafa Badra, however, realises that such a measure cannot be directly implemented, seeing that it needs studies that would take at least a year to create a data base of who should be given subsidy. In case of bread subsidy alone, Dr Badra says, the data on current beneficiaries should be updated according to their incomes, be it salaries or pensions, also in a system that provides for regular future updates.
“The answer is in ‘million-loaf bakeries’,” says Hisham Kamel, former director of Giza Directorate for Supply and Trade. “The current system,” Mr Kamel says, “works through distributing a daily quota of 30,000 tons of flour from government mills to a huge number of bakeries to bake the bread and sell to the public at subsidised prices. The distribution process consumes a huge amount of direly needed fuel which is in itself subsidised by the government. If we implement a project that had been previously endorsed by the government but never saw light, that of creating giant bakeries or “million-loaf bread factories” that produce bread on a large scale, it would considerably reduce the cost of subsidised bread.”
On another front, Mr Kamel says, the current subsidised bread system can do with rationalisation. A family of four is allocated a monthly quota of 600 loaves; if they manage to reduce the bread they buy to 300 a month for instance, why should they not be given a cash incentive for that? It would go under conditional cash subsidy.
Thorny issue
But what does the government say?
Egypt is the world’s top consumer of wheat. With a local production of some 3.5 million tons a year, the larger part of its annual 12 million tons needs comes through imports.
This year, according to Supply Minister Ali al-Moselhy, the government decided to raise the price of local wheat to bring it in line with global exchange prices, in order to give growers a fair price. But this in turn raised the cost of subsidised bread, bringing it up to 125PT a loaf. Raising its price of 5PT a loaf, Dr Moselhy says, thus became imperative, if not for anything but for the sake of securing it being used rationally.
For his part, Prime Minister Mostafa Madbouly had last May said that, even though the subsidy file was a thorny one, it had to be tackled with full transparency, in the context of economic reform. Subsidies will have to be phased out gradually and rationally, he said.
Watani International
19 June 2024