Egypt considers bread subsidy overhaul to guard against soaring wheat prices

Currently, almost two thirds of the nation’s population – more than 60 million people – get five loaves of bread daily for around US$0.50 a month.

The handout is a lifeline to the poor but has been widely criticised as wasteful. Officials have tinkered with it over the years, repeatedly shrinking the weight of a subsidised loaf and offering people credit for bread they did not collect. But the price of a subsidised basic loaf has remained constant at 5 piastres ($0.003) since the 1980s.

An attempt to scrap subsidies in 1977 set off the riots, which continued for days until the decision was reversed.

It's time to tackle the bread subsidy

However, to protect the budget from soaring global prices for wheat – its forecast Egypt will import 13.2 million tonnes of wheat in 2021-22 – President Abdel Fattah al-Sisi has turned attention back to the subsidy.

Egypt’s food subsidy programme currently costs the government about $5.5bn. The higher wheat prices are expected to add $763m to the 2021/2022 budget, according to finance ministry data.

Ali Moselhy, minister in charge of subsidies, told Reuters that he personally favours the cash route to buy bread. Eligible Egyptians already get a monthly $3.20 voucher for other subsidised food.

But, despite being favoured by many economists as the most efficient welfare system, there is a downside.

Moselhy said inflation – which has climbed to 6% from 4% in 2021 – makes it harder to replace the support for food with cash handouts, as it risks driving up food prices by putting more cash into circulation.

He added the government aims to draw up a plan to reform bread subsidies in time for March budget preparations. In the meantime, it is working to improve the database of recipients, to investigate ‘who needs what’. This could impact the final scheme in restricting how many people in a household are eligible or increasing the price of subsidised bread, but whatever they decide, authorities will have to step carefully to reassure people that any changes will not leave them lacking.

Sisi’s announcement has sparked some rumblings, but protests are banned in Egypt. Only time will tell.