WATANI International
22 August 2010
Officially, all is going well. “Our supply wheat is not threatened,” says Prime Minister Ahmed Nazif. “Egypt has enough stock to ensure the production of subsidized bread for the next four month,” says the Minister of Trade, Mohammed Rashid. “The current situation will not impact Ramadan,” promises another government official.
Egyptian officials multiply declarations to calm the anxiety of the population. The cause of this turmoil was the announcement made by Russia to suspend its exports wheat, after losing about a quarter of its production due to fires and heat waves.
Egypt is the first importer of wheat in the world and gets half of its needs from Russia, with lower prices than those of western countries. Russian wheat is used in particular to produce the subsidized bread, a vital food for 40% of Egyptians who live on less than two dollars a day, as the loaf of bread is sold at a price up to ten times lower than the market.
The authorities are particularly concerned since they have in memory the social unrest caused by rising world grain prices in 2008, which had led to shortages. These “riots” had left fifteen dead, and the army had to be called to restore calm and help the distribution of bread.
Egypt seems to have learned its lesson. With the start of Ramadan, the month when food consumption is paradoxically the strongest, kiosks to sell subsidized bread have been installed in the streets of Cairo.
The government also seeks to ensure other wheat suppliers. It is negotiating with Russia to reschedule the delivery of 540,000 tons already ordered, and have received a “promise” that Moscow will give priority when it resumes exports. A delegation was sent two other supplier countries, Ukraine and Kazakhstan, to measure the impact of fires on their trade policies. Egypt also turned to the United States, as well as France from which it has ordered an additional 360,000 tons.
The Minister of Commerce asked for an additional budget of 4 billion pounds (about $ 740 million) to cover the extra cost. But the government’s margin of flexibility is rather limited – if it does not want to see the already huge budget deficit further soaring. However, all these measures do not suffice to calm the speculation. Already pushed up by runaway inflation in recent years, flour prices have risen 50% in a few days. The smallest hitch could then create panic.
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Le Figaro