Egypt Takes Precautions Against Food Price Increases

The rise in basic food prices as a consequence of the invasion of Ukraine has raised concern in countries such as Egypt, the biggest importer of wheat. The government has reacted with crisis meetings, precautionary measures to improve stockpiles and measures to counter speculation, our correspondent in Cairo writes.

Ukraine is one of the biggest suppliers of food staples in the world and the invasion by Russia is threatening to disrupt supplies to countries such as Egypt. The government of Egyptian President Abdel Fattah El-Sisi has taken a range of measures to secure the strategic stockpile of wheat. While the strategic reserve had fallen to as low as 12 days in 2017, the government has since improved the provisions to last for four months for the population of 110 million.

When the current crop is harvested in April, reserves will last for nine months, a consequence of the government’s strategy of bolstering the provision of the key food. The action by the government is testament to its concern that a shortage might provoke social unrest in a country where bread, made with wheat, is the main source of nutrition.

After the rise in global prices due to the repercussions of the Russian-Ukrainian war, all government institutions in Egypt intensified their efforts to mitigate the increase in prices on the income of Egyptian citizen. Egyptian President El-Sisi assembled his key ministers to hammer out a strategy to avoid a shortage. Ambassador Bassam Radi, official spokesman for the presidency, said that the meeting dealt with «following up on providing strategic stocks of all basic food commodities, especially wheat, with the approach of the holy month of Ramadan.»

In this context, Minister of Supply and Internal Trade, Dr. Ali El-Moselhy presented the position of the strategic stock of all basic food commodities, stressing their availability in the appropriate quantities for citizens. He also mentioned the attempts by some merchants to exploit the situation created in the markets to monopolize and store food commodities and then raise prices, thereby taking advantage of citizens’ urgent need for such commodities. These monopolistic practices were countered by massive control campaigns by the ministry of interior, which launched campaigns targeting monopoly crimes, raising prices, and manipulating goods in the markets.

Supply Directorates Besiege Violators With Campaigns

The directorates of supply and internal trade launched intensive campaigns on bakeries, markets and shops to control prices.

Prime Minister Mostafa Madbouly recently held an emergency meeting to follow up on efforts to provide basic commodities locally, and to procure the necessary financing for them. The meeting was attended by Tariq Amer, governor of the central bank, Mohamed Muait, minister of finance, Nevin Gameh, minister of trade and industry,  Ihab Abu Eish, deputy minister of finance, Jamal Negm, deputy governor of the central bank, and Ramy Abul-Naga, deputy governor of the central bank.

Ambassador Nader Saad, the official spokesman for the presidency of the council of ministers, said that the developments of the Russian-Ukrainian crisis are being followed up, and the resulting development in the prices of basic commodities. In this regard, the prime minister made it clear that he is closely monitoring the availability of basic commodities and the stability of markets together with officials in the central bank, the ministries of supply and finance, the ministries and concerned parties the situation of the availability of basic commodities, and the stability of markets.

For his part, Said Saleh, advisor to the minister of agriculture for follow-up, said, «The strategic stock of wheat is sufficient for 4 to 6 months, and we are on the verge of harvesting the new season of wheat next month. We must commend the government’s decision to encourage farmers to grow wheat, and I ask farmers to be very careful about supplying wheat to the government. »

Saleh added, «The price of wheat was increased last year, and today another increase of EGP 65. That is, the price of wheat yards was increased by EGP 165 in less than a year, and therefore there is no justification preventing citizens from supplying wheat to the government. »

Tough Timing

Observers believe that the time is not right now to increase the price of the subsidized loaf in Egypt in light of the jump in inflation. Consumer price inflation in Egyptian cities jumped an annualized 8.8% in February, which is the highest rate in nearly 3 years, when it reached 9.4% in June 2019. Inflation figures have surpassed the 7% target of the Central Bank of Egypt. Inflation in Egypt jumped after the state liberalized the exchange rate of the pound at the end of 2016.

The amendments that President  El-Sisi seeks to implement in the subsidy system, especially his announcement that the time has come to raise the price of bread, may provoke grumbling from citizens, but street protests are prohibited and very rare. The El-Sisi regime relies largely on the army as well as on senior officials loyal to him in the government and state agencies to strengthen the president’s grip on the country and prevent social unrest.

A loaf of subsidized bread costs the government about 80 piasters, while it sells for only 5 piasters, Finance Minister Mohamed Muait said in February. The subsidy for a loaf of bread in the current fiscal year’s budget amounts to EGP 50 billion, but Muait expects the amount of this subsidy to increase to EGP 58 billion due to the rise in global wheat prices.

Wheat prices have jumped strongly in the past few days with the outbreak of the Russian-Ukrainian crisis. Russia provided about 50% of Egypt’s wheat imports in 2021, while 30% came from Ukraine, according to data from the Egyptian grain industry.

Food Security

The escalation in Ukraine will have very serious consequences for food security in the Middle East and North Africa region (MENA), which accounted for 40 percent of Ukraine’s corn and wheat exports in 2021.

What makes the situation worse is that the expected rise in prices as a result of the crisis comes at a time when food prices have already reached record levels, especially in the Middle East, where prices have risen during the past two years as a result of a combination of conflict, political grievances and economic difficulties.

Countries such as Egypt, which is the largest importer of wheat in the world, Lebanon, Yemen, Oman, Libya and others find themselves in a difficult situation, especially if we keep in mind the role that food security played in the outbreak of the Arab uprisings more than a decade ago.

What About Alternatives?

In theory, there are alternatives available to Egypt, such as the U.S., Canada and Australia, but they are expensive. Also, the loss of Russian and Ukrainian supplies could increase the influence of the U.S. on food imports in the region. In addition, even if the money is available to import wheat from these countries at a higher cost, there is still a problem with regard to having the appropriate infrastructure and preparing to bring in these supplies. Most MENA countries depend on the Black Sea as a way of entering agricultural commodities, which means that these countries will have to import these commodities via alternative routes.

In Egypt, it is important to note that the slogan «bread, freedom and social justice» was a key demand of Egyptian protesters during the January 2011 uprising that toppled the late President Hosni Mubarak. Because bread in Egypt is heavily subsidized and its price is a very sensitive issue.

With wheat prices soaring, $763 million is expected to be added to Egypt’s already massive $3.2 billion bread subsidy bill this year. Prime Minister Mostafa Madbouly announced plans for the first increase in the price of a loaf of bread since 1988, but said the government aims to do so without hurting poor Egyptians.

Egypt is the largest importer of wheat in the world and the second largest from Russia. Egypt had bought 3.5 million tons of wheat as of mid-January, according to S&S Global. Egypt expects the volume of government imports of wheat to decrease in 2022 to 5.3 million tons, supported by an increase in domestic production. Egypt’s government imports of wheat reached 5.5 million tons in 2021.

In light of these conditions and developments due to the war in Ukraine, it is likely that Egypt will become a powder box waiting to ignite from one moment to another. It is a very dangerous situation and it is being tested by the ongoing war in Ukraine.

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