Egypt supply minister urges MPs to help gov't rationalise bread subsidies to cut wheat imports

Gamal Essam El-Din , Monday 10 Oct 2022

Minister of Supply Ali Moselhy called on MPs to help the government reform the bread subsidy programme in order to cut wheat imports and reduce pressure on the state budget and foreign exchange reserves.

Ali El-Moselhy
Minister of Supply Ali El-Moselhy

Moselhy made the remarks addressing MPs in a meeting held by parliament's Agriculture Committee on Sunday to discuss a $500 million World Bank loan.
"The House's committees of agriculture, economic affairs, and social solidarity should form one ad hoc committee to look into reaching a reformed and more efficient mechanism that can rationalise bread subsidies and make sure they go to citizens who really need them," said Moselhy.
Chairman of the Agriculture Committee Hesham El-Hossary agreed with the ministry's request, saying "a lot of bread subsidies go to those who do not deserve them. Hence, there is a pressing need to reform the programme to reduce the state's bill of wheat imports amid the difficult global economic conditions.
"It is high time to reform the bread subsidy programme to rationalise Egypt's wheat consumption which hit a record of 18 million tons in 2022," Moselhy said. 
He added that "Egypt produces nine or 10 million tons of wheat a year and imports the rest, which adds more chips on the shoulders of the state budget amid the harsh global economic conditions.
"As the state was taking steps to reform the bread subsidy programme in 2019, the coronavirus pandemic broke out. Then the war in Ukraine made it more difficult to turn this policy into a working system. Worse yet, the war in Ukraine has come to cost us a lot in the form of paying more for imported wheat," said Moselhy.
"Allocations for bread subsidies have increased by EGP 22 billion since the war erupted in Ukraine (in February)," he added.
"The hike in global wheat prices has so far cost EGP 16 billion in addition to EGP 5.5 billion in subsidies and incentives to wheat growers to encourage them to increase local production,  and this makes a total of around EGP 22 billion." he said.
"Total bread subsidies will hit a record EGP 73 billion by the end of FY 2022/23. In spite of this huge increase, the state has not raised bread prices," he noted.
"The war in Ukraine has led to a shortage of strategic crops and commodities in world markets, and Egypt, in particular, felt the pinch of this shortage because most of our wheat imports come from Russia and Ukraine. As a result, we decided to diversify our sources of imported wheat to be able to increase our strategic stock of wheat reserves to 4.2 million tons."
The World Bank loan is meant to help Egypt absorb the financial shock of the global food crisis triggered by the war in Ukraine.
Egypt plans to build more grain silos, shore up strategic wheat reserves, and spare the state budget from part of the foreign exchange required to import wheat.
Moselhi stressed to the MPs that the $500 million World Bank loan will help Egypt import wheat.
"Some $380 million of this loan will go to importing wheat, while the remaining $120 million will be directed to maintaining bread subsidies and reinforcing our wheat reserves," Moselhy explained.
"In fact, this loan will give us much room to take a calm breath because it will not oblige us to buy wheat from markets at high prices."
"At present, the state is doing its best to cultivate more wheat in a bid to cut imports and reduce foreign exchange burdens. As promised by the political leadership, we are increasing the area cultivated with wheat by one million feddans in the new season," said Moselhy.
"We used to import 80 per cent of our wheat needs, but now we are importing 50 per cent due to the increase in wheat-cultivated areas."
However, he reiterated that "bread subsidies should be rationalised to ensure this staple goes to those who really need it" to save wheat.
"If we cut 10 per cent of the bread subsidies, we will be able to save one million tons of wheat," said Moselhy.
He proposed that MPs should also probe into the possibility of replacing bread subsidies with cash transfers.
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