EGYPT TO RAISE SUBSIDISED BREAD PRICES 300%

Sat 01 June 2024:

Egypt, often the world’s biggest wheat importer, will raise the price of heavily subsidised bread for the first time in decades, Reuters reported.

The price of subsidised bread will jump 300 per cent to 20 piasters ($0.0042) from five piasters starting in June, Prime Minister Mostafa Madbouly said at a press conference yesterday.

About two-thirds of Egypt’s population benefit from a programme that gives five loaves of pita bread daily for five piasters a loaf. An attempt to change the subsidy system led to riots in 1977.

The handout is a lifeline to the poor, but is often criticised as wasteful and a strain on the budget.

The announcement comes after Egypt allowed a sharp devaluation of its currency in March and shifted to a flexible exchange rate system. Inflation surged to a record last summer and has eased a touch since then.

“We understand fully that [the price rise] is a thorny issue and many governments [in the past] tried to avoid moving on it,” Madbouly said.

“But we see today the size of the subsidy bill on the Egyptian state and so we had to start to move as little as possible to ensure the sustainability of service.”

Madbouly has said the government is studying moving towards conditional cash subsidies for bread.

After two years of chronic foreign currency shortages, Egypt has secured a windfall of funding since late February from the IMF. While a deal to provide the UAE with “development rights” over areas of the country’s coast has also provided billions in funding to the government.

The new raised price represents 16 per cent of the cost of making the bread, which has risen to 125 piasters from 115 last year, Supply Minister Ali Moselhy told the same press conference.

The Ministry of Finance in March said it would allocate around 125 billion Egyptian pounds ($2.66 billion) for bread subsidies in its 2024/2025 state budget and around 147 billion pounds for petroleum product subsidies.

Egypt imported about 10.88 million metric tonnes of wheat in 2023, up 14.7 per cent from 9.48 million tonnes in 2022.

-MEMO

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