Egypt's heavy burden of bread

Subsidies on bread, rice, sugar, cooking oil and fuel waste food, cost government dearly, but are politically untouchable.

Bread 311 (photo credit: Courtesy)
Bread 311
(photo credit: Courtesy)
CAIRO – Menna Gabr, a 25-year-old mother of two living in Cairo’s poor Imbaba district, goes every day to the local gama’iya, or government-run supermarket, to buy two loaves of bread for a price of less than one cent apiece. Once every two weeks, she goes there to buy a kilo (2.2 pounds) of rice also at a heavily subsidized price.
“There is simply no way we could afford to feed our family on my husband’s salary,” she told The Media Line. “Egypt has become very expensive and the only way we are healthy is using this,” she says, holding up her ration card. “Life is hard. Do they want another revolution by the people?”
RELATED:Educational deficiencies hinder Arab economiesIs the Arab world poised for a growth spurt?That could be the crux of the matter in the current economic and political climate, where every day life continues to be a struggle for nearly half the population who lives on less than $2 per day. Subsidies on basic food – most notable bread, but also rice, sugar, cooking oil and fuel – are what separates many Egyptians from chronic hunger. Long forgotten, the skyrocketing price of food helped spark the mass protests that brought down president Husni Mubarak.
But the post-Mubarak government is facing the most severe economic downturn in the country’s recent history -- and one of the victims of cuts could be the bread subsidies that have been in place for decades. The county’s social solidarity minister, Gouda Abdel Khalek, said at a food security seminar this month that the current system was “unsustainable” and needed drastic change.
“We need a radical shift in the way we deal with our bread subsidy system,” said Khaleq, whose ministry is in charge of the country's wheat purchases and administers its extensive program of subsidized foods. Although he didn’t specify exactly what those reforms would be, Khalek told the seminar.
But cutting subsidies is easier said than done. In 1977, late President Anwar Sadat attempted to raise the price of bread. He was rebuked by the population, who took to the streets en masse, forcing the government to acquiesce. Only three years ago, when Egypt faced bread shortages, riots broke out across the country, leaving at least one person dead in the violence that ensued.
According to ministry statistics, three quarters of Egypt’s 80 million people use ration cards to buy loaves of bread at five piasters (less than $0.01) each. In the 2010-2011 fiscal year, Egypt spent 33 billion Egyptian pounds, or $5.5 billion, on subsidies that included wheat, sugar, rice, bread and cooking oil. The subsidies apply to all Egyptians from the richest to the poorest.
Not surprisingly, Egyptians have one of the world's highest rates of per capita wheat consumption in the world, about 180 to 200 kilograms of wheat a year, four times as much as the average Mexican consumes. The country is incapable of producing enough of the grain for itself and in recent decades has become the world's biggest importer, purchasing abroad about half of the 14 million metric tons of wheat it consumes annually.
“As expensive as they are, bread subsidies do not succeed in lifting people out of poverty; in fact, by discouraging domestic agricultural investment, they have often hurt the very people they are intended to help,” Annia Ciezadlo wrote in Foreign Affairs last March.
Egypt is not the only Arab country to subsidize basic commodities. The practice is so common that Tunisian scholar Larbi Sadiki as called it a social contract between despotic rulers and their peoples he calls dimuqratiyyat al-khubz, or the “democracy of bread.” The subsidies serve as a substitute for civil rights and a well-functioning economy.
Even before the revolution, economists were urging the government to pare back the program. Under current conditions the need to do so is even more urgent. Egypt’s economy will probably shrink this year, causing tax revenues to decline. But faced with growing distrust and a willingness to protest and strike by the public, the interim government has gone the opposite direction.
Last week the government said it would increase the price it pays local farmers by 8.6% to almost double what it pays for imported wheat. As a result, the state budget deficit is likely to exceed 9% gross domestic product.
For Hossam Debani, a 69-year-old carpenter who participated in the street demonstrations against Sadat’s policies back in 1977, government subsidies are a life and death matter.
“People in this country are poor and we can barely get enough food to eat, so how does the government expect us to live if they don’t help us out?” Debani told The Media Line. “My pay has not gone up in so many years, but the rich keep getting richer and they expect us to take their problems when we can’t eat. No way.”
Debani says government corruption should be tackled before food prices are raised. “We have been Egyptian our whole lives and we watch as the government and the rich people take what they want without caring for the people,” he says. “If they want to take my bread away, they must take my life first.”
The World Bank agrees with Debani. In an October 2010 report that said approximately half of all subsidies in the country goes to the wealthiest 60%, belying the myth that the country’s poorest are the chief beneficiaries. Flour mills produce subsidized flour for the government for as little as 160 pounds a metric ton, less than a tenth its market value.  Subsidized flour is often sold illegally in the open market because the profits are huge.
Magda Kandil, executive director and director of research at Cairo’s Egyptian Center for Economic Studies, says that in order for Egypt’s poor to benefit from subsidy reform, “it must actually get to them in the first place and others should not take advantage of the system.”
She argues that one aspect the government is looking into is reducing the number of people eligible for subsidies in the first place. “By reducing those who are on the system, it gets to the population that truly needs it and we start to create a country based on equality and social justice where the neediest get assistance,” she told The Media Line.
At the end of the day, Ashraf Naguib of the Cairo-based think tank Global Trade Matters (GTM) has at least one solution: agricultural self-sufficiency.
“We talk a lot about subsidies, but at the end of the day if we actually took matters into our own hands, this country could be more reliant on homegrown vegetables and wheat,” he began. “We only grow tomatoes for a fraction of the available time here, so it isn’t surprising that we don’t do better with Egyptian agriculture as a whole.”
Growing more food at home could reduce hunger, the budget deficit and the need for subsidies, because locally grown produce and foodstuffs would help create a cheaper product, he says.