Egypt's Bold Move: Raising Bread Prices for the First Time in Decades

Egypt, the world's largest wheat importer, will raise the price of heavily subsidized bread by 300% for the first time in decades. This significant move, announced by Prime Minister Mostafa Madbouly, comes amid economic reforms and a flexible exchange rate. The decision aims to sustain the subsidy system and has been historically avoided due to its political sensitivity. Despite potential public discontent, the government believes the adjustment is necessary for economic stability.

Reuters | Updated: 29-05-2024 20:38 IST | Created: 29-05-2024 20:38 IST
Egypt's Bold Move: Raising Bread Prices for the First Time in Decades
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Egypt, often the world's biggest wheat importer, will raise the price of heavily subsidised bread for the first time in decades, a politically sensitive decision that has been delayed for years. The price of subsidized bread will jump 300% to 20 piasters ($0.0042) from 5 piasters starting in June, Prime Minster Mostafa Madbouly said at a press conference on Wednesday.

About two-thirds of Egypt's population benefit from a program that gives 5 loaves of round bread daily for 5 piasters a loaf. An attempt to change the subsidy system led to riots in 1977. The handout is a lifeline to the poor, but is often

criticized as wasteful and a strain on the budget.

The announcement comes after Egypt allowed a sharp devaluation of its currency in March and shifted to a flexible exchange rate system. Inflation surged to a record last summer and has eased a touch since then. "We understand fully that (the price rise) is a thorny issue and many governments (in the past) tried to avoid moving on it," Madbouly said.

"But we see today the size of the subsidy bill on the Egyptian state and so we had to start to move as little as possible to ensure the sustainability of service." Madbouly has said the government is studying moving towards conditional cash subsidies for bread.

After two years of chronic foreign currency shortages, Egypt has secured a windfall of funding since late February from the IMF, the UAE and other entities. The new raised price represents 16% of the cost of making the bread, which has risen to 125 piasters from 115 last year, Supply Minister Ali Moselhy told the same press conference.

The finance ministry in March said it would allocate around 125 billion Egyptian pounds ($2.66 billion) for bread subsidies in its 2024/2025 state budget and around 147 billion pounds for petroleum product subsidies. Egypt imported about 10.88 million metric tons of wheat in 2023, up 14.7% from 9.48 million tons in 2022.

Moselhy told Reuters that the decision will not impact the quantities of wheat the state imports. ($1 = 47.2500 Egyptian pounds)

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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