Starting January, all Egyptians will be entitled to buy subsidised bread, increasing the beneficiaries’ base by almost 40 per cent.

The government revealed a plan in November to provide subsidised bread to non-beneficiaries of ration cards for LE1 per loaf, with the aim of reducing the burden on Egyptian households in the light of the rise in the price of non-subsidised bread, which reached between LE1.5 and LE2 per loaf.

Currently, the subsidised bread system benefits 72 million people registered on 21 million ration cards. Some 250 million to 275 million loaves are produced daily, according to Supply Minister Ali Moselhi.

Bread subsidies eat up 2.6 per cent of the government budget. The cost of producing a subsidised loaf is LE1, while it is sold for five piastres to those holding ration cards.

The move on bread comes at a crucial time, given the increased price of imported wheat since the Russia-Ukraine conflict broke out. Egypt imports about five million tons of wheat a year, making it the largest wheat importer in the world. The Finance Ministry increased funding for food subsidies, mostly bread, by 41.9 per cent in FY 2023-24.

Both the government and many Egyptian households spent 2023 looking for ways out of the spiraling price increases and the scarcity of commodities that have marked the year.

Almost two years after the war in Ukraine started, the economy is still feeling its effects. A scarcity of foreign currency has resulted in a dollar crunch that has led to an increase in its value versus the pound, ending in the latter losing 50 per cent of its value.

The result has been rising inflation burdening Egyptian households like never before.  

While devaluation seemed to be the panacea for many of the country’s economic woes, according to international financial institutions, the government has opted not to resort to it again after it devalued the pound three times since the war in Ukraine began, the latest of which was in January.

In June, President Abdel-Fattah Al-Sisi ruled out a further devaluation saying the move could harm national security and affect Egyptians.

Meanwhile, devaluation-fed inflation broke the 30 per cent threshold, its highest level in five years, in February this year and maintained an upward trend for the months that followed to hover around 40 per cent in July and August before inching down in October and November.

“Every day prices go up. The local retailer wants to sell me onions for LE35 and potatoes for LE27 per kg. Only yesterday I bought them for one of the residents of the building for LE33 and LE25, respectively,” Um Rabie, a janitor in Heliopolis, told Al-Ahram Weekly.

She said this was why she had been arguing with a vegetable street vendor in the early hours of Tuesday morning.

But it is not only vegetables and fruit that are pricier; all food items are. Food inflation exceeded 70 per cent in the last quarter of the year. 

Shortages have been another feature of the inflation problem. In September, onion exports increased at the expense of their availability locally, and they saw price increases of 300 per cent.

Later in the year, a cigarette shortage was a main concern for Egypt’s 17 million smokers, who had to pay double the regular price to get them on the black market.

After that, there was a sugar shortage, with its price rising from LE30 per kg in the middle of 2023 to LE60 in early December. People started queuing in front of supermarkets and government outlets to get it.  

While the government has intervened in the above-mentioned crises by banning onion exports, introducing a tax on cigarettes to encourage producers and wholesalers to increase the supply, and withdrawing from the national sugar reserves to cover the demand, prices did not return to normal.

This was despite the government agreeing with private producers and retailers to cut the prices of commodities including fava beans, lentils, dairy products, cheese, pasta, rice, sugar, chicken and eggs by 15 to 25 per cent for six months to ease inflationary pressures.  

Another government move to cushion the hike in prices came in a series of raises to the minimum wage for both private and public-sector workers. It introduced two increases in the minimum wage for private-sector workers from LE3,000 in January 2023 to LE3,500 starting in January 2024.

This is still lower than the minimum wage of their public-sector peers, whose minimum was also raised twice in the year to settle at LE4,000, almost twice its level a year ago.

The move to increase public-sector wages for the second time in 2023 came in September as part of a package of social-support measures that would cost LE30 billion and be financed from a contingency fund.

It included raising the exemption threshold for income tax to LE45,000 from LE36,000. Pensioners covered by the Takaful and Karama (Solidarity and Dignity) social-security programme were offered a 15 per cent increase in monthly allowances together with LE600 in one-time support.  

“The hike in incomes is in tens of pounds, but the surge in the cost of living is in hundreds,” Mohamed Orabi, an accountant in a state-owned company, told the Weekly. To cover the needs of his family, Orabi, 38, has also started to work as a cashier in a supermarket from 5 to 11 pm each day.  

Such moonlighting is one of the coping mechanisms that people are using, and others were the focus of a survey undertaken by the International Food Policy Research Institute (IFPRI), an international agricultural and food policies research centre, in February.

It surveyed more than 6,000 poor and near-poor Egyptian households nationwide to shed light on how consumption has been affected by price hikes. The inflation rate in January was 25.8 per cent, and it was 31.9 per cent in February. 

Many respondents reported reducing their consumption of unsubsidised food items. For example, 85 per cent of households reduced meat consumption, and 75 per cent ate less chicken and eggs. This change makes sense given the large increases in the prices of these items, which are also nutritious food groups that provide key sources of protein. 

Meanwhile, 21 per cent and 14 per cent of the surveyed households increased their consumption of less-nutritious potatoes and unsubsidised types of pasta, respectively, to reduce food spending. 

The most frequent strategy used by those surveyed to cope with the price shocks, according to the IFPRI, was stopping the repayment of debts (84 per cent), followed by shifting to lower-quality foods and brands (70 per cent) and reducing food consumption (47 per cent) overall.

A substantial share of households reported reduced spending on health and education. 

While trying to shield people from the effects of inflation, the government had to introduce certain price increases to cater for the increases in its expenses this year.

While it kept the price of diesel, widely used in transportation, at LE8.25 per litre, it raised domestic petrol prices twice throughout the year, pushing the price of 80-octane petrol, 92-octane petrol, and 95-octane petrol to LE10, LE11.5, and LE12.5 per litre, compared to LE8, LE9.25 and LE10.75, respectively, at the beginning of the year.

Taking into account international oil prices and the exchange rate, a Ministry of Petroleum Committee has set the price of fuel according to quarterly reviews since 2019.

The government decided not to increase electricity prices in July, as had been planned under its power subsidies phase-out scheme, and said it will freeze the surge till January 2024. 

The decision came out in August in one of the hottest summers Egypt has witnessed in a decade that has seen increasing demand for electricity and higher bills.

The surge in demand was coupled with a decline in domestic gas production at the giant Zohr Field due to technical problems. This led the cabinet to introduce scheduled one-hour-daily power cuts nationwide. 

The duration and frequency of the blackouts increased in November as Israeli gas imports were disrupted in the wake of the war on Gaza. 

As part of its efforts to expand the social-safety net, the government included new categories of beneficiaries in its conditional programme Takaful and Karama.

Poorer young adults who do not have families to support them and women who are the breadwinners for their children came under the umbrella of the programme, adding 300,000 additional families to the beneficiaries list.

The expansion aims to extend the programme’s reach to approximately five million families, making it the largest poverty-targeted conditional cash-transfer programme in the Middle East and North Africa, according to the World Bank.

This will cost the government LE5.5 billion, the bulk of which will be financed by property tax revenues collected by the by the Ministry of Finance through an annual payment of LE1.5 billion annually for three years.  
In December 2022, the World Bank announced $500 million in financing to expand and strengthen the programme.

Launched in 2015, Takaful and Karama provides poorer families with children of school age, the elderly, and people with special needs with a monthly allowance. The latest available figures about the beneficiaries base, from June 2022, show that it covers 3.69 million households (about 12.84 million individuals).

The programme is an integral part of the Decent Life initiative launched by President Al-Sisi to improve living conditions in rural areas.

Had it not been for such programmes, the number of poor people in Egypt would have increased, according to Heba Al-Laithi, a professor of economics and adviser to the Central Agency for Public Mobilisation and Statistics (CAPMAS).

Speaking at a recent seminar about poverty in Egypt, Al-Laithi explained that while the poverty rate was projected to reach 35.7 per cent in July 2023, it might have exceeded 38 per cent had it not been for the social-support initiatives launched by the government, such as Takaful and Karama and the Decent Life programmes.

Even before the current crisis, 30 per cent of Egyptians were living below the poverty line, according to the World Bank, with another 30 per cent vulnerable to falling into poverty.

* A version of this article appears in print in the 21 December, 2023 edition of Al-Ahram Weekly