Global Food Crisis

Bread Prices Stretch Egyptians -- And Their Government

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Government Burden

President Hosni Mubarak's government has reacted quickly to ease the price burdens, ordering the military to increase its production of bread and to open makeshift distribution points for subsidized loaves.

Poor people receive 20 pieces of the bread, commonly known as country bread, for a pound ($0.19) instead of four pieces for the same price from a private seller.

But the help comes at a price: massive budget overruns that are threatening other government programs as well as social and economic reform.

The government recently increased the number of Egyptians eligible for subsidies on basic items by 15 million after closing the rolls for decades.

Aid is now provided to about 55 million people, or 70 percent of the Egyptian populace, and food subsidies are expected to rise to 20 billion pounds ($3.72 billion) this year from 15 billion pounds ($2.79 billion).

The government is also trying to tackle rampant corruption within the system. Many bakers are said to be selling subsidized materials on the black market for up to ten times what they pay, rather than making cheap bread for the poor.

"In some areas we don't close the [bread] shop," said Abubaker El Guindy, the head of CAPMAS. "We take the shop and make the government run it to give people food."

In further attempts to curb prices at home, the government also banned exports of cement, iron, and rice until October and eliminated or reduced the import tariffs on a number of items, including edible oils and rice.

(Related: "Israel's Ethiopians Forced to Give Up Traditional Bread" [June 5, 2008)].)

The cost of rice in particular rose by 33.6 percent in March from the previous year and by 19.1 percent since the beginning of 2008.

Egypt is Africa's largest exporter of rice and had the highest crop yields on record last year, but the country's farmers will cut back on production in 2009 to save water and to plant other crops such as corn and wheat.

Wheat production will help alleviate the country's dependence on imports, which reached seven million tons last year, making it the world's largest importer of the grain. The U.S. Department of Agriculture expects Egypt to increase its imports this year to 7.8 million tons, although Egyptian officials disagree with that estimate.

"Next year the amount [of wheat imports] will go down," El Guindy said. "The government will give the farmers good prices and convince them to grow more wheat."

The pressure to grow more wheat comes from internal demand. Egypt is the world's largest consumer of bread per capita. Long lines for subsidized bread are still common across the country, and more than ten people died this year in clashes waiting to buy it.

Protests Despite Huge Subsidies

Subsidies have not prevented growing discontent around the country.

In early April thousands of workers and residents in the northern town of Mahalla El-Kobra protested the government in a nationwide strike, spread by the help of groups on the social networking Web site Facebook. At least three people died during the riots.

"The government was really shocked. It didn't expect action as a result of the inflation," said Diaa Rashwan, a political analyst for the Al Ahram Center for Political and Strategic Studies in Cairo.

Facing further riots and protests, President Mubarak announced a 30 percent increase in public sector wages at the end of April, affecting nearly six million government workers.

Less than a week later, however, the Egyptian parliament approved a tax hike on cigarettes by about 20 percent and increased the cost of fuels by an average of 46 percent to pay for the raise.

Although the cost of living is low in Egypt, some 40 percent of the population lives near the poverty line of $2 a day. So even small price increases can have a powerful impact.

"I don't think it will finish," Rashwan said. "Inflation will continue to play a role in society."

The last time tensions surfaced because of food prices was riots in 1977, when then-President Anwar Sadat briefly lifted bread subsidies.

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