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Monday, 30 May 2022

Bread subsidies aren’t changing in the near future, El Moselhy says

Scrapping bread subsidies for banknotes is shelved for now, El Moselhy tells Senate: The Sisi administration’s previously-floated plan to replace subsidized bread with cash transfers is not going to happen anytime soon, Supply Minister Ali El Moselhy told the Senate yesterday. “We can begin to consider this policy some time after the crisis is over, but at the moment we can’t change the system,” the minister said, stressing that “the government still believes that subsidized bread is still very important for low-income households.” El Moselhy’s statement came as a response to a request from Senate Agriculture and Irrigation Committee Chairperson Abdel Salam El Gebaly to begin implementing the switch now.

Bread subsidies are still a big line item in the state budget: The proposed FY 2022-2023 budget, which Finance Minister Mohamed Maait presented to the House of Representatives earlier this month, penciled in EGP 90 bn for food subsidies next fiscal year, rising slightly from EGP 86 bn allocated for the current fiscal year. MPs have suggested that the state should be upping its spend on commodity subsidies to help contain the impact of rising food prices.

REFRESHER- President Abdel Fattah El Sisi first put forward the prospect of lifting or otherwise reworking bread subsidies last year — before the war in Ukraine sent shockwaves through global food markets. El Moselhy had said at the beginning of the year that the government would make a final decision on how subsidies would be reworked by the end of March, saying at the time that there were several scenarios under consideration.

Bread price caps aren’t changing, but the state isn’t planning to impose controls on other commodities: The minister also turned down a separate proposal from Sen. Ahmed Salah El Din to impose price controls on basic commodities, which the senator suggested is “necessary to tighten control on the black market and prevent retail traders from exploiting the current crisis.” El Moselhy stressed that Egypt is a “market economy that is regulated by the forces of supply and demand” and that we left behind the era of state-imposed price controls in the 1960s and 1970s. The government imposed price controls on unsubsidized bread in March as a temporary, three-month measure, El Moselhy said.

The cornerstone of the government’s food commodity strategy is to build reserves: The Sisi administration’s policy of maintaining a six-month strategic reserve of basic commodities will continue to be implemented, particularly as it has proven successful in stabilizing prices, El Moselhy said. This policy, among other decisions, has helped the country to successfully absorb the shock of the global food crisis triggered by the Russia-Ukraine war, the minister said. “For example, the price of sugar has only increased EGP 3 per kg; this was largely thanks to our maintaining a six-month stock of the commodity.”

Part of that has been a major spending push on expanding storage capacity: As part of its strategic reserve targets, “the government had to spend as much as USD 1.8 bn to double the country’s storage capacity of wheat and grain cereals” over the past five years, El Moselhy said. The government has so far built a national silos network with a storage capacity of 3.4 mn tons, “and right now we are planning to increase this capacity to reach 5 mn tons in 2025,” he said.

BACKGROUND- We dove into the government’s drive to increase our grain storage capacity in Hardhat.

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