Egypt Raises Price of Bread to Finance School Meals Program

President Abdel-Fattah el-Sisi aims to feed 12.2 million students, at a cost of over $500 million per academic year

[Cairo] Egyptian President Abdel-Fattah el-Sisi has raised the price of a subsidized loaf of bread for the first time in 30 years. The increased revenue is set to finance a school meals program. El-Sisi announced the exceptional move on August 3 at the opening of a food industrial complex in the Menoufia Governorate in the Nile Delta of northern Egypt.

He did not say how much the price of a subsidized loaf of bread would be raised.

Egypt has a population of 102 million people, a quarter of which are estimated to be students through high school, enrolled in Egypt’s 60,000 schools. Anemia, affecting 8.2 million students; obesity, affecting 3.4 million students; and stunted growth, affecting 1.3 million students, are the three most prevalent diseases facing young Egyptians.

The Egyptian government aims to feed 12.2 million students, at a cost of approximately 8 billion Egyptian pounds, or over $500 million, per academic year, amounting to about $41 per student for school meals.

It is time to increase the price of the 5-piaster loaf

“We will manage this amount from the (budgets of) the rest of the other ministries. It is time to increase the price of the 5-piaster loaf,” el-Sisi said, adding: “I will bear this responsibility before my country and before the people.”

Thirty-two years ago, the price of a loaf of bread was set at 5 piasters but the loaf’s size had decreased over the years from 130 grams to 110 grams. In August 2020, the government reduced a loaf’s weight to 90 grams.

“It is unreasonable to give 20 loaves for the price of a cigarette,” el-Sisi added in his remarks.

The price of a loaf of subsidized bread is currently 0.05 Egyptian pounds, or $0.0032. The price of a pack of 20 local Cleopatra cigarettes, produced by the Eastern Tobacco Company, is 20 Egyptian pounds ($1.27).

“The Ministry of Supply will start an immediate study of President Abdel-Fattah el-Sisi’s directive to increase the price of a loaf of subsidized bread. It will be studied and presented to the cabinet as soon as possible, stressing that the state is working to reformulate the subsidy bill to include all aspects,” government minister Ali Al-Moselhi told the Egyptian newspaper Al-Watan.

Al-Moselhi said that school meals are imperative for millions of students, and therefore the process of reformulating the subsidy bill is necessary. He called a school meals program costing about 8 billion Egyptian pounds “inevitable.”

Egypt is one of the world’s largest importers and consumers of wheat, according to the Farmers Syndicate in Egypt, which supported Sisi’s announcement, along with members of the bakeries committee of the Federation of Egyptian Chambers of Commerce in Egypt.

In 2016, Egypt began reforming its economy in cooperation with the International Monetary Fund when it obtained an IMF loan of $12 billion, conditioned on a reduction in public spending, an increase in revenues, and a review of the social support program. Indeed, millions of non-beneficiaries were deleted, according to the Egyptian government.

Some 60% of Egypt’s population is either poor or vulnerable, and inequality is on the rise. The national poverty rate was close to 30% in 2015, up from 24.3% in 2010, according to the World Bank.

Egypt’s general budget includes subsidizing food commodities, and the value of its allocations in the budget for the current fiscal year 2021/2022 is about 87 billion pounds. More than 50 billion pounds are allocated for subsidizing bread. Bread subsidies benefit 72 million Egyptians, each budgeted to receive five subsidized 5-piaster loaves per day. According to official figures, making the loaf of bread costs 65 piasters.

The government has not yet announced the new price for a loaf of bread and the date that it will go into effect. The Ministry of Supply and Internal Trade, which is responsible for the implementation of the new subsidy, has declared that it is studying the president’s directives, and will present its results to the Council of Ministers as soon as the study is complete, local media has reported.

A number of Egyptian political parties announced their rejection of this increase in the price of bread. Among them is the Egyptian Social Democratic Party, which released a statement the day after the Sisi announcement saying: “The Egyptian Social Democratic Party objects to the lifting of subsidies on bread at this moment and in this way, and warns of the repercussions of lifting subsidies on bread and calls for the establishment of clear and effective mechanisms to determine who is eligible for support. Bread subsidy and the philosophy of support in general, no matter how much waste and corruption it inflicts as a result of the absence of oversight and the weakness of civil organizations, still has many positive effects in maintaining stability, social and security peace, and in reducing the margins of need, income gaps, and the lack of justice that Egyptian society suffers from, which is in dire need of reforming its economic and social policies toward social justice, equity and equality.”

Poverty, hunger and malnutrition are long-term development challenges facing the Egyptian state and consume huge budgets that are subsequently spent on health and affect the productivity of the individual. If we want to reconsider the support system, let it be a societal dialogue in which experts, academics and deserving people participate before any decision is made regarding a matter that affects the lives of millions of Egyptians

Amira Qandil, a member of the Egyptian Parliament and the Egyptian Social Democratic Party, and a biochemist by training, told The Media Line that “comparing the price of a loaf of bread with the price of cigarettes must be accompanied by a comparison of the average citizen’s income with the prices of necessary commodities and the availability of decent job opportunities to lead a decent life.”

Qandil added: “Yes, there is a need to consider the consumption pattern of the citizen, but poverty, hunger and malnutrition are long-term development challenges facing the Egyptian state and consume huge budgets that are subsequently spent on health and affect the productivity of the individual. If we want to reconsider the support system, let it be a societal dialogue in which experts, academics and deserving people participate before any decision is made regarding a matter that affects the lives of millions of Egyptians.”

According to the Global Hunger Index 2020, Egypt ranked 54 out of 107 countries. The rate of stunted growth in children under five is 21%, and anemia affects 27% of children under five years old and 25% of women of childbearing age.

“In addition, there are many other indexes and statistics that necessitate us to reconsider the policies of supporting food commodities in Egypt with complete bias to the less fortunate,” َQandil added.

It seems that it is a simple move, and many people will tell you that it will not affect the pocket of the poor in a tangible way. This is of course because they do not understand the current system of subsidized bread

Ayman Hadhoud, economic adviser to Mohamed Anwar Esmat Sadat, chairman of the Social Democratic Reform and Development Party, told The Media Line, “The Chamber of Commerce, Bakeries Committee, recommended raising the price of a subsidized loaf from 5 piasters to 20 piasters. It seems that it is a simple move, and many people will tell you that it will not affect the pocket of the poor in a tangible way. This is of course because they do not understand the current system of subsidized bread.”

The current system for obtaining subsidized bread has nothing to do with the bread subsidy system that existed during the tenure of Egyptian President Hosni Mubarak. During the Mubarak era, the production and distribution system was one, with no separation between the two. And, therefore, the price of 5 piasters was a general price for all members of society, both rich and poor.

This system was not effective, however, because it actually directed a part of the subsidy to people that did not require it.

In the wake of the Egyptian revolution of 2011, known as the January 25 Revolution, bread subsidies were reformed, starting with the separation of production from distribution. This meant real liberation for the bread market in Egypt and the concentration of subsidized bread in a well-controlled distribution system. Now, a buyer must have a ration card on which is written a specific allowance of bread for each family, according to family size and income.

This card system itself was subject to a comprehensive restructuring to clear out those who did not meet the requirements for subsidized food. In order to ensure that those in need receive bread, the ration food support system turned into a system similar to the food stamp system that exists in the United States, the heart of the capitalist world. Instead of raising prices, experts say, it is time to further decrease the list of subsidy recipients or decrease subsidies to those who require it less.

In April, the Ministry of Supply and Internal Trade canceled a tender to import wheat due to the high prices. Prices are still rising, which made some analysts expect that there would be an increase in the price of a loaf of bread in Egypt.

“The market price of bread may rise, not because of the rise in subsidies, but because of the rise in international wheat prices this year,” Hadhoud said. “Wheat prices rose in August 2021 to more than $260 per ton, an increase of more than 40% compared to August last year. Maybe this is the reason why General el-Sisi abandoned bread subsidies and changed its price.”

“Supply and demand disruptions resulting from the COVID-19 epidemic, in addition to drought resulting from climate changes, contributed greatly to the rising prices. The price increase may be temporary or last for several years. It is difficult to speculate now on the price for the coming years. Most countries, especially Egypt, have six-month reserves, but in all cases, it is necessary to continue strengthening stocks periodically,” Hadhoud also said.

“In practice, raising the price of the subsidized loaf is imposing a tax on the poor in return for their need for basic food,” Hadhoud explained.