Egypt Independent

Egypt to halt flour subsidy, cut wheat imports up to 10%

Egypt, the world’s largest wheat buyer, will stop subsidizing flour for its sweeping bread subsidy program next month in a move expected to cut wheat imports by up to 10 percent by curtailing smuggling, the supply ministry said on Wednesday.

Egypt is looking to tighten its finances as it pushes ahead with a $12 billion three-year International Monetary Fund loan tied to ambitious reforms such as subsidy cuts and tax increases.

Austerity-hit Egyptians faced with inflation above 30 percent have increasingly turned to the state’s cheap subsidised bread to make ends meet, increasing the country’s food subsidy bill as well as its wheat imports. In the financial year to June 30, wheat imports reached 5.58 million tons, up from 4.4 million the preceding year.

In an attempt to reduce waste, the state will next month stop subsidizing flour used by bakeries offering the cheap bread. Instead, it will restrict subsidies to the actual bread offered to consumers, Supply Ministry spokesperson Mohamed Sweed said.

Subsidy card holders currently obtain each loaf of bread for LE0.05 — less than a tenth of the cost of production — via an electronic smart card that allocates a maximum daily ration to citizens and compensates bakeries for the production cost shortfall with every swipe.

Unscrupulous bakers have long bought up cheap subsidized flour and sold it on the black market, costing the state millions of dollars a year in squandered subsidies.

Sweed said the new measure will remove the incentive for smuggling flour, cutting down on waste and helping to save the state up to LE8 billion ($447 million) from its 2017-18 food subsidy bill, which had been set at LE85 billion.

He claimed that lower flour consumption would translate directly into reduced imports.