Bread prices will increase as subsidies are lifted, President Abdel Fattah al-Sisi declared in a speech on Tuesday, during the inauguration of a number of food production projects.  

Around two-thirds of Egypt’s citizens, or 72 million people, currently benefit from bread subsidies, while just under a third, or almost 30 percent, live below the poverty line which was set at LE857 per month in 2020.

The policy, which figures in the sector have said could be implemented by the end of August, is intended to bring a decades-old subsidy system in accordance with the state’s financial policies, the president said. 

Speaking at the inauguration of an industrial complex in Sadat City, Monufiya, belonging to the Armed Forces-owned Silo Foods company, Sisi said that the price of subsidized bread must be increased from the current rate of LE0.05 per loaf. “It is not sensible that we sell 20 loaves of bread for the price of one cigarette,” he complained.

​​Loaves of bread were priced at LE0.05 in 1988-89, when the standard weight per loaf was fixed at 150 grams. Since then, the standard weight has been decreased, first to 130 grams and then to 110 grams, falling to 90 grams in 2020, almost half its original weight. Meanwhile, the price has remained stable at LE0.05.

Later on Tuesday, Supply Minister Ali al-Moselhi commented to say that the “true” cost of a loaf of bread stands at LE0.65, some 13 times higher than the current rate and that his ministry would be carrying out feasibility studies to revise prices, the privately owned Al-Watan newspaper reported.

According to a source at the Supply Ministry quoted in the privately owned Al-Shorouk newspaper, the ministry is also considering a transition from the current system, where bread is offered as one of a bundle of products available at discount rates via cards issued to households that meet certain income standards, to a system whereby conditional cash support payments would be added to the cards. The cash payment would be equivalent to the amount of bread currently available to card-holders: five loaves per day at present, for example, the source said.

Members of the bakeries division at the Federation of Egyptian Chambers of Commerce also came out in favor of cutting bread subsidies and shifting to cash support. They told the privately owned Al-Mal newspaper that the change is long overdue, saying that production costs, especially the price of wheat, have increased over recent years. The chair of the Cairo branch, Attia Hammad, told Al-Mal that he expects the cuts to be implemented after August, once a study of the market and an assessment of a fair price are completed.

Bakery owners’ complaints about increasing costs have been a factor in steps the government has taken over recent years to alter the bread subsidy program. The Supply Ministry ordered bakeries to decrease the standard weight of a loaf of bread in August 2020 from 110 grams to 90 grams and its diameter from 20cm to 18cm, after demands from the bakeries division. This decision was among measures taken effectively to increase the subsidy that bakeries receive per sack of wheat from LE213 to LE265. Sources at the division told Al-Watan on Tuesday that plans are being considered to restore the pre-August 2020  size at double the current price, or LE0.1.

The effective hike in bread prices in 2020 came in line with a policy of subsidy drawbacks that the government began in 2014 and continued after securing a US$12 billion deal with the IMF alongside a commitment to an economic adjustment program. The program ushered in austerity measures to reduce general expenditure and increase revenue as well as a broad review of the subsidy program that saw millions of Egyptians removed from lists of beneficiaries.

As the policies saw the number of people living under the poverty line in Egypt rise to a third, a small but significant protest movement on September 20, 2019 flagged deteriorating socioeconomic conditions, and the government promptly readmitted 1.8 million people to the subsidy program. 

Initial projections for the fiscal budget in 2020/21 set the subsidy bill at LE360 billion, though the lower amount of LE326.3 billion was ultimately budgeted. Even then, the total bill was not used, and LE21 billion was carried over to the budget for FY 2021/22, which was set at LE321 billion.

In his speech on Tuesday, Sisi also indicated that the savings from cutting bread subsidies would be reallocated to develop a new LE8 billion school meal program, targeting around 12 million students, around half the school-age population, including 1 million students at Al-Azhar schools. The president revived well-trodden government talking points on overpopulation and child obesity and malnutrition.

During his turn to speak at the event, Education Minister Tareq Shawky explained that the education, health and agriculture ministries are working on developing the standards for the new school meals, to be offered starting the next semester. Shawky suggested that there will be specific meals targeting students with particular nutritional demands, and that each child would be assigned an Education Ministry card noting their age group and the type of meal they should receive based on their health status. 

Health Minister Hala Zayed called during the event on civil society organizations and private companies to help the government in providing outlets for disbursing the meals, to be set up near schools as well as other places for family activities, such as clubs.