Egypt’s bread subsidy system reforms hit the poor hardest

The exclusion of hundreds of thousands of people from the national bread subsidy programme has stirred up anger across Egypt and opened the door for questions about the government‘s spending priorities at a time when millions of people find themselves in dire circumstances.

The number of people benefiting from the national food rationing system has been on the decline over the past years, with the Egyptian authorities trying to bring down the subsidy burden on the state budget.

Around 63 million people were registered in the national food rationing system and 71 million in the bread subsidy programme before May 2024, according to the Egyptian prime minister Mostafa Madbouly.

However, food rationing beneficiaries dropped to 61 million in January this year, while those benefiting from the bread subsidy programme came down to 69 million, according to the Egyptian minister of supply Sherif Farouk, whose ministry is responsible for regulating the implementation of the food rationing system.

The drop in the number of food rationing and bread subsidies’ beneficiaries, observers say, is a reflection of a continual state policy to make smaller the number of people receiving food at subsidised rates.

In October last year, the Ministry of Supply suspended the food rationing cards of 500,000 people.

In justifying the decision, the ministry said these people did not qualify for food rationing for stealing electrical power.

Electricity theft is among a series of factors contributing to people being knocked out of the food rationing system.

People can be debarred from the system if they own private cars, even if antiquated ones. They can also be disentitled to food rationing if they enrol their children in non-public schools and universities.

Massive suffering 

Excluding people from the bread subsidy programme has been the most painful part of what Egyptian authorities describe as the reform of the food rationing system.

Bread is a staple food in Egypt, a country where almost a third of the population is designated as “poor”.

Despite undergoing repeated price increases at bakeries operating within the subsidy system, the round bread continues to sell for a fraction of its free market price in these bakeries.

This makes this bread a basic item on the table for millions of Egyptians, with the prices of other food items rising to unaffordable limits for these people.

“The fact is that my children and I cannot do without the bread,” Khaled Mahmud, a minivan driver in his mid-thirties from Giza province, which is part of the Greater Cairo region, told The New Arab.

Mahmud has to spend almost 10 percent of his daily income of 300 Egyptian pounds (roughly $6) to buy 15 loaves of bread for him, his wife and two children.

“This is a real burden on my budget, compared to the amount of money I used to spend to buy the subsidised bread in the past,” he added.

Mahmud was considered ineligible for receiving bread at the subsidised rate of 20 piastres a loaf a few months ago after being accused of electricity theft. (1 pound contains 100 piastres)

Since then, he has been buying the bread at the free market price of 2 pounds (almost 1 cent) a loaf.

The continual reduction in the number of people registered in the national food rationing programme is only a small detail in the larger picture of Egypt trying to take the edge off the effects the subsidy system, in general, has on its budget.

This drive started in 2016, with the populous Arab country initiating economic reforms that aimed to address imbalances in its financial and monetary structures.

The same drive started with Egypt applying for loans from the International Monetary Fund and other international crediting institutions.

It has so far included repeated devaluations of the Egyptian national currency and a radical slashing of electricity, fuel and drinking water subsidies.

The same policy has reduced burdens on the state budget, but channelled the same burdens to the shoulders of millions of poor Egyptians who have to cope with the resultant radical surge in commodity prices.

Some of the nation’s economists defend the same policy as a way of freeing the state budget of unwanted burdens.

“This policy has benefited the budget, because the people excluded so far do not qualify for the subsidies,” independent economist, Khaled al-Shafie, told TNA.

“This is about time the government gave the subsidies to those who deserve them only,” he added.

Al-Shafie conceded, however, that the subsidy cuts have caused commodity prices to rise sharply in the market, causing suffering to the poor.

The same radical surge in commodity prices threatens to have a political or a security backlash, with desperation being on a steady rise among millions of poor people.

Misguided spending

The reform of the national subsidy system comes as Egyptian legislators discuss varied options to make the subsidies more targeted.

One of the proposals floated by the lawmakers in the past period was about turning the food rationing system into a cash system, whereby people who meet the rationing criteria would receive cash support, instead of food at the subsidised rates.

Nevertheless, most of these discussions fail to convince the members of the public who feel angry at the government’s spending priorities.

Deep under this anger is the fact that the subsidy system reform has so far saved the state budget a fraction of the amounts of money spent on the construction of extravagant palaces and the implementation of non-critical infrastructure projects, including a multibillion dollar new capital in the vast Egyptian desert.

Regional unrest has exacerbated Egypt‘s economic problems, which has in turn affected people on the streets negatively.

To circumvent the expected backlash from a spiral up in people’s economic suffering, the government has launched a series of programmes to increase the commodities on offer at special rates on the streets.

One of the initiatives in this regard includes the opening of markets, especially in poor neighbourhoods across the nation, where food and other commodities are sold at a small profit margin.

These markets usually witness a swarm of clients hungry for a respite from the free market rates which are becoming so heavy on their pockets.

Nonetheless, the exclusion of hundreds of thousands of people from the bread subsidy programme leaves a bitter taste in the mouths of these people, who have to depend on carbs to make up for their inability to put proteins on the table.

The Ministry of Supply says it has to exclude the people who do not qualify for the subsidies so that it can give these subsidies to the people who deserve them.

“Some people, especially those who receive high salaries, do not deserve to be included in the food rationing system,” Abdel Monem Khalil, the head of the Domestic Trade Department at the Ministry of Supply, told TNA.

“These people are knocked out so that others who deserve get the subsidies in their stead,” he added.

But Mahmud, the minivan driver, retorts: why he does not qualify for food rationing, even with his daily income of $6?