Egypt: Rising cost of bread tops five economic woes

The authorities have announced plans to suspend rice exports for six months from April and the Commerce Ministry said cement exports would also be frozen over the same period in a bid to combat price rises.


Official figures show staple food prices spiralling in Egypt, the world’s largest consumer of bread, by 26.5 percent in a year.


“Rice is a staple food in Egypt and the main substitute for flour, whose price has gone up following wheat price rises on the international market”, said Sayyed Abul-Komsan, advisor to Commerce Minister Mohammad Rashid.


Egypt produces around 4.5 million tons of rice a year, of which 3.5 million is allocated to the local market, said Komsan. Most exports go to Turkey, Lebanon, Syria and Jordan.


The country was due to have exported between 300,000 and 400,000 tons in the coming six months, he said.


The UN’s World Food Program estimates that average household expenditure in Egypt has risen by almost 50 percent since the start of 2008.


Three months ago, Egyptian officials were insisting that alternatives must be found to government-subsidized food staples to reduce a budget deficit estimated at 5.3 percent of gross domestic product in 2006-2007.


Now many officials are making an about-face. Gamal Mubarak, son of President Hosni Mubarak, said recently that the government “will not hesitate for a minute to increase subsidies on basic products if it proves necessary”.


Last month the local press quoted the younger Mubarak, who has been at the vanguard of the country’s economic liberalization, as pleading for a raise in the salaries of Egypt’s five million civil servants.


In recent weeks the government has been hit by growing unrest, including deadly clashes that police said left at least seven people killed, outside bakeries as long queues form to buy bread.


At least 70 people were killed in bread riots in January 1977 after the government tried to reduce subsidies on the staple.


Underscoring the urgency of the situation, the president last month ordered the army to bake bread for the people.


The government attributes the bread crisis to steep rises in the price of wheat on the world market and charges that subsidized flour is sold on the black market and then used to produce unsubsidized bread.


On March 23, Prime Minister Ahmad Nazif promised to solve the problem within six weeks. The independent Al-Masri al-Yom newspaper is holding Nazif to his pledge by publishing a daily countdown and on March 28, it reminded the prime minister that he had 38 days left.


Rice and pasta are staple foods among the country’s poor, particularly when combined with lentils in the popular Egyptian dish known as koushari.


Tackling their rising cost is a priority with inflation reaching an annual rate of 12.5 percent at the end of February in the most populous Arab state, home to 78 million people.


An increase of more than 50 percent in cement and steel prices over the past six years has also triggered alarm bells in the government, explained Ahmad al-Naggar, economist at Cairo’s Al-Ahram Center for Strategic Studies.


This rise has pushed up property prices in Egypt, where a third of 11.1 billion dollars in foreign investment in 2006-2007 focused on real estate development.


Steel production is a sensitive issue, with the opposition saying the sector is controlled mainly by a businessman with close links to Gamal Mubarak.


The commerce minister said in the local press that cement exports were also being suspended over the same period to combat price rises on the local market.


“We export two million tons of cement a year, amounting to a tiny share of the international market”, said Abul-Komsan.


Despite having an official growth rate of seven percent, Egypt suffers from rampant unemployment and 40 percent of the population lives on or around the poverty line of two dollars a day.

source from: http://www.mmorning.com/