x Abu Dhabi, UAEFriday 19 January 2018

Arab world's subsidised bread prices under threat

Across the region, bread subsidies are under pressure because of higher wheat prices, but without the subsidy given to bread in countries such as Egypt, prices would triple - and 'there would be a revolution', say observers.

Bread has stayed cheap in Egypt even as Egypt's other food prices leapt upward, because the government pays for most of it.
Bread has stayed cheap in Egypt even as Egypt's other food prices leapt upward, because the government pays for most of it.

CAIRO // In the gritty gusts of a sandstorm, men in turbans and women in veils stood uncomplaining for hours outside a ramshackle kiosk, lined up for their daily loaves of "life".

Political change may be remaking Egypt, but "we trust in God that the bread's going to stay cheap," said Shadia Abdul-Halim, 45, a mother of six patiently queued up to buy.

Bread has stayed cheap even as Egypt's other food prices leapt by 17 per cent last year - cheap because the government pays for most of it.

Twenty of the flat, round pieces of local "eish" - "life" in Arabic, the word Egyptians use for the staple - cost just one Egyptian pound. That's the equivalent of 60 fils for more than two kilograms of bread.

But halfway around the world on this day, on a Chicago trading floor, the price of wheat edged up again, raising the pressure another notch on poorer states, such as Egypt, that have made subsidised bread a fixture of Arab life, an increasingly unaffordable one.

The Middle East's bread subsidies are just one dilemma in a world facing a potential food crisis this year, like the troubles in 2008, when skyrocketing prices touched off riots in developing countries.

The UN global food price index hit a record high in February, surpassing even 2008's peak.

The average price of wheat so far this year, US$346 (Dh1,270) a ton, is more than double 2005's price. The reasons for the increases are various: growing demand, the impact of higher oil prices, a diversion of corn to make ethanol for fuel.

Drought and floods have cut into wheat production, possibly previewing what some analysts say will be growing global grain shortages.

The head of the UN's World Food Programme. Josette Sheeran, said hard-pressed governments are being pushed toward cutting food subsidies, at great risk. "When it comes to food, the margins between stability and chaos are perilously thin," she said in a statement on the Middle East situation.

How much could bread prices rise for poor Arabs?

"Without the subsidy, it would triple the price," said Abdul Elah H al Hamawi, president of the bakers' association in nearby Jordan. "There would be a revolution!"

Under a half-century-old system, a "safety net" for Egypt's poor, the government sells cut-rate flour to bakeries for mandatory production of "baladi," or local, bread.

"Bread inspectors" enforce the mandate, but leakage still occurs, as unscrupulous bakers siphon off flour to sell at higher rates to producers of finer, unsubsidised baked goods. Subsidised bread also "leaks" to better-off Egyptians, since anyone can buy it.

Half of Egypt's 80 million people rely on the everyday "eish baladi." Bread accounts for one third of Egyptians' calorie intake, and some blame that for the fact that people here on average are more obese than Americans, according to figures from the UN Food and Agriculture Organisation.

But the bread programme is credited with having eased hunger and child mortality, and has become a symbol of Egypt's "social contract".

Along the way, however, it has also fattened the import bill, as the population exploded. From wheat self-sufficiency about 50 years ago, Egypt has become the world's biggest wheat importer. The government buys more than half the country's needs on the international market.

A decade ago, the basic market cost for those imports was about $700 million (Dh2.57 billion) a year. This year it could top $3.5bn for 10m tons of wheat.

The agronomist known as the "father of Egyptian wheat" for his work improving the local crop, said the subsidy should end. "Otherwise the government cannot afford it all," Abdel-Salam Gomaa said.

"But now, with the revolution, it's not the time to talk about removing subsidies," Mr Gomaa added.

Back at the kiosk, baker Essam Hosni, 29, arrived to tell the patient crowd their eish was coming.

What did he think of the revolution? It's good, he said: "The bread inspectors have stopped asking for bribes." But what if a new government rethinks the wisdom of cheap bread?

"No, no. They can't do that," the baker said. "The whole world would collapse if that happened."