Quadrupling of subsidized bread prices deepens struggle for millions in Egypt

An Egyptian man is helped by another person, as he carries bread on a wooden rack to be sold to customers in Cairo, Egypt June 3, 2024. Credit Photo/Reuters

By The African Exponent

A recent quadrupling of the price of subsidized bread in Egypt has exacerbated the financial struggles of millions of citizens, including 64-year-old pensioner Gamal Ahmad. Facing an increased wheat import bill, the Egyptian government raised the price of subsidized small loaves of flatbread on June 1, marking the first such increase in decades.

The price hike, from five piasters to 20 piasters ($0.0042) per loaf, affects over 70 million people who rely on these loaves as a vital food source. Although still heavily discounted, the increase has become unaffordable for many households.

“We can’t handle any more [price increases],” said Gamal, who is also concerned about announced cuts to subsidized utilities. “There’s still gas, electricity, and water bills. All prices are rising.”

The impact of the price increase is widespread, affecting much of the country’s 106 million population. “Of course, the price hike impacts me,” said Mohamed Abdelaziz, a pensioner shopping for subsidized bread in central Cairo. Abdelaziz, who receives a 2,000-pound ($42.46) monthly state pension, said he has to keep working to support his three unmarried children.

Increasing the price of subsidized bread has been a politically sensitive decision, delayed for years in a country where cheap bread is crucial due to widespread poverty. The price had been steady since the 1980s, despite multiple rounds of austerity reforms, with the government wary of triggering public backlash. An attempt to change the subsidy system in 1977 sparked riots.

Previously, the government tried to manage costs by restricting eligibility and reducing the weight of the loaves. Currently, about two-thirds of the population benefits from bread subsidies, which are based on income and include an allowance of five loaves per day.

With the price increase, the monthly bread bill for a family of four could now rise from 30 pounds to 120 pounds in a country where the minimum monthly wage is 6,000 pounds, following a 50% increase in March.

High Inflation and Economic Pressures

The government’s decision comes at a time when annual inflation is running at 32.5% as of April, after peaking at 38% last September. Egypt is also grappling with a substantial debt servicing bill and allowed a sharp currency devaluation in March when it shifted to a flexible exchange rate system. The collapsing currency and rampant inflation have caused the cost of procuring wheat from abroad to surge.

Egypt is often the world’s largest importer of wheat, and traders say the price change is not expected to change the quantity of state purchases in the short term. Supply Minister Ali Moselhy noted that the new price represents just 16% of the cost of making the bread, which has been driven up by the weakening of Egypt’s currency and rising global wheat prices.

The government is allocating about 125 billion Egyptian pounds ($2.65 billion) for bread subsidies in its 2024/25 state budget, up from 91 billion last year, according to Moselhy. He added that the ministry had not received any complaints from citizens following the price increase.

Criticism and Public Sentiment

Despite government assurances, critics argue that the government should prioritize cutting exemptions for military-owned companies that have long enjoyed financial privileges, instead of cutting bread subsidies after spending heavily on mega-projects, incurring more debt.

“The subsidized bread price increase will be a significant hit for poor households,” said Timothy Kaldas, deputy director of the Tahrir Institute for Middle East Policy. Even if the move does not spur demonstrations following a crackdown on dissent and a ban on most public protests, it could fuel popular frustration over the economy.

Local TV host Lamis El Hadidy recently questioned Moselhy about why debt repayments took up 62% of budget spending while subsidies accounted for 11.5%. Moselhy responded, “We are talking about our current reality and what to do tomorrow.”

As the economic challenges mount, the situation underscores the severe difficulties faced by many Egyptians and highlights the critical role of subsidies in maintaining social stability amidst ongoing financial turmoil.