Egypt quadruples price of subsidised bread

Egypt has quadrupled the price of subsidised bread in a politically sensitive move that risks sparking social unrest as the country struggles with soaring inflation.

About 70mn Egyptians, or more than two-thirds of the population in the Arab country, consume the small flat loaves, which from Saturday will be sold at 20 piastres or E£0.20 ($0.0042) each, up from a price of E£0.05 that has been fixed since 1988.

The 300 per cent rise would allow more resources to be allocated to essential services, Prime Minister Mostafa Madbouly said in announcing the increase on Wednesday. He added that bread would still be heavily subsidised, costing the state E£1.05 per loaf.

Egypt has traditionally been wary of tinkering with food subsidies — riots broke out in 1977 when the prices of some basic commodities were increased. But the move comes when the government is trying to reduce spending as it grapples with an enormous debt servicing bill that accounts for about half the budget.

Under President Abdel Fattah al-Sisi, the former defence minister who led a popularly backed coup in 2013 against his elected Islamist predecessor, unauthorised protests are strictly prohibited and demonstrators can face prison sentences.

The prices of many subsidised foods have been raised in recent years, while the size and weight of the bread loaf has been reduced. But cheap bread remains vital in a country where 30 per cent of the population live below the poverty line and another 30 per cent hover just above it.

“This move [to increase bread prices] . . . is yet another in a series of price shocks since the start of 2023,” said Wael Gamal, head of social and economic justice at the Egyptian Initiative for Personal Rights, a civil society group.

“The state is grabbing the bread out of the mouths of millions of poor people . . . to repay debts that they are not responsible for and have not benefited from.”

Egyptians have faced soaring inflation since 2022 when Russia’s full-scale invasion of Ukraine sparked outflows of $20bn as foreign debt investors sold off their holdings.

This plunged the heavily indebted country into a crippling foreign currency crisis that throttled imports, including key agricultural commodities, fuelling price surges. Annual inflation has eased but still stood at 32.5 per cent in April.

The government had borrowed extensively in the past decade to fund a huge infrastructure programme, including a grandiose new administrative capital that is under construction.

In March, the government moved the Egyptian pound to a flexible exchange rate to secure an $8bn loan deal from the IMF. The pound now trades at E£47 to the dollar, down from an official rate of E£31 before the switch to a floating rate. This has further eroded the purchasing power of families who continue to struggle to make ends meet.

The IMF loan is part of a $55bn international bailout that has helped to prevent a bigger economic crisis in the country.

However, the rise in the subsided bread price showed that the rescue package had yet to deliver any improvements to Egyptians’ incomes and living standards, analysts said.