In an exclusive interview with Ahram Online, Shukri Ahmed, senior economist at the UN's Food Agriculture Organization, praised Egyptian efforts towards agricultural self-sufficiency but said the country remains at risk.

 

"Given that Egypt is a big importing country, the effect on the Government budget and the total import bill is felt rather sooner," said Ahmed, when asked about the possible impact of rising global prices.

 

"The actual inflation depends on the level of transmission of world price increases to local prices, which is in turn affected by the policies in place."

 

He noted that the higher import bill would fall on the government which subsidises several key foods, although price hikes for other foodstuffs could be passed on directly to consumers.

 

"The Government recognises that a large share of its budget is spent on fuel and food subsidies, and the new budget attempts to rectify the issue, starting with fuel subsidies," he added.

 

"However, given the large share of population living in poverty, it is important to provide a safety net with better targeting of the poor."

 

Ahmed pointed to recent rises in international wheat prices, spurred by concerns over dwindling harvests in the Black Sea region. August's global wheat price was 26 per cent higher than in June 2012, and 8 per cent higher than the same month the previous year.

 

But while Ahmed said the global prices of raw commodities are an important factor, local costs of energy and labour also affect prices.

 

Egypt experienced annual food inflation of around 24 per cent in 2008, and 20 per cent in 2011. This July the rate of food and beverage inflation was about 8 per cent.

 

"Even with an above average cereal harvest, Egypt relies heavily on imports to satisfy its domestic requirements, including food and feed," said Ahmed.

 

Egypt is the world's major wheat importer but is making efforts to gradually wean itself off foreign crops. In early September, the head of state commodities buyer GAASC said Egypt is importing 4.6 million tonnes in 2012/13 -- 1.1 million less than the previous year, with local agriculture filling the gap.

 

Ahmed said Egypt was clearly seeking to increase agricultural yields by developing new methods but warned that expansion should take into account Egypt's limited natural resources and the needs of its 83-plus million population.