For the First Time in 50 Years: Why Did Sisi Decide to Raise the Price of Bread by 300%?

Amidst swirling rumors, President Abdel Fattah El-Sisi once assured the nation in 2016 that the cost of a loaf of subsidized bread — a staple in the Egyptian diet — would remain untouched.

At the time, the price stood at 35-40 piasters, but it has since climbed to 55-60 piasters, still within the bounds of his commitment.

However, nearly eight years later, the Egyptian government, under the directive of Prime Minister Mostafa Madbouly, has announced a significant price hike.

Starting in June, the cost of subsidized bread will leap from 5 to 20 piasters, marking a 300% increase and the first of its kind since 1988.

In Egypt, bread is more than mere sustenance; it is a symbol of economic stability and a line that governments have historically been wary to cross.

The last time an administration neared this boundary was during Anwar Sadat’s presidency, which led to the “Bread Intifada” on January 18 and 19, 1977 — a massive public outcry that forced a reversal of the decision.

Prime Minister Madbouly’s justification for this startling move — which will affect over 70 million Egyptians who rely on bread as a primary food source — is to narrow the disparity between production costs and selling price.

This increase is part of a broader strategy to adjust the prices of essential commodities, including electricity, gas, and fuel, which are integral to daily life.

The timing is particularly poignant as many Egyptians were anticipating a new social initiative to alleviate the burdens of living, exacerbated by flawed monetary and economic policies, rampant inflation, soaring prices, and the devaluation of the Egyptian pound.

This price hike comes as a jarring shock, edging closer to what many consider a non-negotiable red line.

Cornerstone

In Egypt, the humble loaf of bread transcends mere sustenance; it is a cultural cornerstone, a symbol of life’s essentials, and a safeguard against the specter of poverty.

The Egyptian affinity for bread is deeply rooted, manifesting in everyday life and even idioms, such as the proverb, “Bite my heart and do not bite my loaf,” reflecting the bread’s untouchable status in the national psyche.

This sentiment was poignantly captured by the renowned Egyptian actor Adel Emam in his drama series “The Oracle,” underscoring bread’s critical role in Egyptian society.

The reliance on bread is not only cultural but also nutritional. Data from the Food and Agriculture Organization of the United Nations (FAO) reveals that Egyptians derive a third of their daily caloric intake from bread, with wheat-based products constituting about 45% of their diet.

This reliance becomes even more pronounced against the backdrop of escalating food prices, which have rendered alternative nutritional sources unaffordable for many.

Economic statistics paint a stark picture: with 30% of Egyptians living below the local poverty line of one dollar per day and 60% below the global average of two dollars per day, bread emerges as the primary nourishment for a significant portion of the population.

The World Bank has acknowledged the pivotal role of Egypt’s subsidized bread program, crediting it with preventing nearly 90% of the populace from slipping into poverty, particularly in the wake of the 2008 global food crisis.

The bread subsidy system, a relic of the 1970s, stands as perhaps the sole enduring benefit from that era, vigilantly preserved by successive governments wary of the social upheaval that its removal might trigger.

It is the bulwark against the relentless tide of inflation, a lifeline for millions teetering on the edge of poverty, ensuring that while they may grapple with economic hardship, they have not succumbed to famine. In this way, bread maintains a delicate equilibrium between social stability and the basic right to food in Egypt.

Loan Payments

In a recent address, the Prime Minister outlined the rationale behind the government’s decision to increase the price of bread, a move that has been scrutinized for its accuracy.

Speaking to Al-Estiklal, political analyst Anas Rashad identified several discrepancies in the Prime Minister’s statements.

“The first point of contention is the claim that the price of subsidized bread has remained unchanged for over three decades. This assertion has been labeled as misleading because, while the numerical price may have stayed the same, the actual value of the bread has diminished due to a reduction in weight from 150 grams to 90 grams, effectively decreasing the cost by 60%,” Rashad said.

“The second discrepancy involves the stated cost of a loaf of bread to the state, which the Prime Minister pegged at one and a quarter pounds,” he added.

However, the financial statement for the fiscal year 2023-2024 indicates that the actual cost is less than one pound, contradicting the Prime Minister’s figure.

According to Rashad, the third error addresses the claim of state support for bread surpassing 120 billion pounds.

The actual budget allocation for bread subsidies in the current fiscal year is approximately 91.5 billion pounds, with a slight decrease projected for the next fiscal year’s budget.

Bread subsidies represent a modest 2.1% of Egypt’s total general budget, amounting to around 91.6 billion pounds out of 4.3 trillion pounds.

This subsidy also accounts for 8.7% of the total investment budget, which includes both government and external investments.

“The increase in bread subsidy expenditures can be traced back to economic and monetary policy changes in 2016, including the liberalization of the Egyptian pound’s exchange rate in accordance with International Monetary Fund conditions,” Rashad noted.

This led to a significant increase in subsidy costs, which jumped from a maximum of 25% in the years preceding the policy change to approximately 53.7% in the subsequent years.

A new system has been implemented to refine the list of subsidized bread beneficiaries based on criteria such as electricity consumption, children’s school fees, luxury car ownership, large agricultural holdings, and tax payments.

This resulted in the exclusion of 20 million individuals, reducing the beneficiary count from 82.2 million to 62.2 million.

In striking contrast, while bread subsidies constitute only 2.1% of the state budget, debt interest payments account for roughly 25.7%, a figure that has escalated due to a decade-long policy of continuous borrowing, leading to an external debt of $168 billion for Egypt.