Egypt weighs cost of daily bread
Wednesday, 12 March 2008
Heba Saleh
HANDS holding banknotes push through the narrow opening above the counter at the entrance to the bakery in the poor Cairo district of Imbaba. A cacophony of voices rises as people try to attract the attention of the worker who has just brought out a tray of subsidised bread hot from the oven.
He swiftly collects the proffered cash and gives each customer a stack of 20 flat loaves, shouting: "I will give you one pound's [18 US cents, 12 euro cents, nine pence] worth only. You can't have more than a pound's worth."
Outside the bakery, men and women chat as they while away the long wait for bread in what is a daily ritual for most of them.
"I sign in at work then come here to queue up for bread every morning," said Hassan Saad, an employee at the ministry of culture who has four children and says his monthly salary is about $40 (€26, £20).
Rising international prices this year have forced the government to spend an additional $850m on wheat for subsidised bread. The total wheat bill is expected to reach $2.67bn for 2007-08.
Egypt was forced to increase its total allocation for energy and food subsidies by $3.7bn last month to reach $14bn - a sum that exceeds the budget deficit.
The bulk of the increased spending is going on energy but a small amount will be used to meet the cost of adding 15m names to the register of people who receive cheap oil, sugar and rice on their ration card.
Ministers say they plan to restructure the subsidy system because it is expensive, inefficient and sucks precious resources away from crucial sectors such as health and education. The energy subsidy alone surpasses spending on health, education and the police.
"We are obliged to find a better way to manage this huge amount of money," said Ali Meselhi, minister of social solidarity. But mindful of the risk to stability posed by any sudden change - in 1977 there were riots when price rises were announced - the authorities are treading carefully.
The mere announcement in November that the government wanted to look into replacing some subsidies with cash handouts to poor families produced loud accusations that the state was about to shirk its duty to the vulnerable.
"I think the main mission of this government is to promote arbitrary and random capitalist transformation, which will restructure income and power relations in favour of the filthy rich," said Mohammed Al Sayed Said, editor of al-Badeel, a daily newspaper with leftist leanings.
In a country where about one-fifth of the population lives under the poverty line and another 13 per cent hover just above it, millions of people depend on subsidised food, especially bread, which sells for less than one US cent a loaf.
But 20 per cent of the bread subsidy is wasted, according to Mr Meselhi.
Corrupt bakers sell their cheap flour on the black market or deliberately ruin some of their output by overcooking it so it can be sold more profitably as animal fodder.
To stem the theft, Mr Meselhi is working on a scheme to separate the production of bread from its sale. He is also considering adding a colour to subsidised flour to make it easier to track.
But these are partial solutions, and the minister insists that the whole subsidies system needs to be revisited to improve efficiency and targeting.
Some subsidised goods, such as bread, bottled gas and petrol, are available to rich and poor alike. Even upmarket restaurants and hotels in Cairo use the bottled gas that is sold at one-tenth of its real price.
A World Bank study in 2005 found that richer households received a bigger share of state subsidies than the poor.
Mr Meselhi said work had started to identify more closely those who needed subsidies and to devise mechanisms for the efficient delivery of each commodity or its replacement by cash or coupons.
Subsidies to energyintensive industries are to be phased out and the price of fuel oil has been allowed to rise.
But when it comes to goods sold to the general public, the government is exercising extreme caution.
Any new mechanism "must be piloted to see if it is more efficient and effective", said Mr Meselhi. "Next financial year we need to have something to be seen on the ground."
........................................
FT Syndication Service
HANDS holding banknotes push through the narrow opening above the counter at the entrance to the bakery in the poor Cairo district of Imbaba. A cacophony of voices rises as people try to attract the attention of the worker who has just brought out a tray of subsidised bread hot from the oven.
He swiftly collects the proffered cash and gives each customer a stack of 20 flat loaves, shouting: "I will give you one pound's [18 US cents, 12 euro cents, nine pence] worth only. You can't have more than a pound's worth."
Outside the bakery, men and women chat as they while away the long wait for bread in what is a daily ritual for most of them.
"I sign in at work then come here to queue up for bread every morning," said Hassan Saad, an employee at the ministry of culture who has four children and says his monthly salary is about $40 (€26, £20).
Rising international prices this year have forced the government to spend an additional $850m on wheat for subsidised bread. The total wheat bill is expected to reach $2.67bn for 2007-08.
Egypt was forced to increase its total allocation for energy and food subsidies by $3.7bn last month to reach $14bn - a sum that exceeds the budget deficit.
The bulk of the increased spending is going on energy but a small amount will be used to meet the cost of adding 15m names to the register of people who receive cheap oil, sugar and rice on their ration card.
Ministers say they plan to restructure the subsidy system because it is expensive, inefficient and sucks precious resources away from crucial sectors such as health and education. The energy subsidy alone surpasses spending on health, education and the police.
"We are obliged to find a better way to manage this huge amount of money," said Ali Meselhi, minister of social solidarity. But mindful of the risk to stability posed by any sudden change - in 1977 there were riots when price rises were announced - the authorities are treading carefully.
The mere announcement in November that the government wanted to look into replacing some subsidies with cash handouts to poor families produced loud accusations that the state was about to shirk its duty to the vulnerable.
"I think the main mission of this government is to promote arbitrary and random capitalist transformation, which will restructure income and power relations in favour of the filthy rich," said Mohammed Al Sayed Said, editor of al-Badeel, a daily newspaper with leftist leanings.
In a country where about one-fifth of the population lives under the poverty line and another 13 per cent hover just above it, millions of people depend on subsidised food, especially bread, which sells for less than one US cent a loaf.
But 20 per cent of the bread subsidy is wasted, according to Mr Meselhi.
Corrupt bakers sell their cheap flour on the black market or deliberately ruin some of their output by overcooking it so it can be sold more profitably as animal fodder.
To stem the theft, Mr Meselhi is working on a scheme to separate the production of bread from its sale. He is also considering adding a colour to subsidised flour to make it easier to track.
But these are partial solutions, and the minister insists that the whole subsidies system needs to be revisited to improve efficiency and targeting.
Some subsidised goods, such as bread, bottled gas and petrol, are available to rich and poor alike. Even upmarket restaurants and hotels in Cairo use the bottled gas that is sold at one-tenth of its real price.
A World Bank study in 2005 found that richer households received a bigger share of state subsidies than the poor.
Mr Meselhi said work had started to identify more closely those who needed subsidies and to devise mechanisms for the efficient delivery of each commodity or its replacement by cash or coupons.
Subsidies to energyintensive industries are to be phased out and the price of fuel oil has been allowed to rise.
But when it comes to goods sold to the general public, the government is exercising extreme caution.
Any new mechanism "must be piloted to see if it is more efficient and effective", said Mr Meselhi. "Next financial year we need to have something to be seen on the ground."
........................................
FT Syndication Service