Govt to merge bread subsidy into cash transfer program, cut 10 million beneficiaries from historic pillar of state support

Major change is coming to Egypt’s bread subsidy program as it is set to be merged with the cash transfer ration card system, a government official informed suppliers in a Monday meeting, according to a source in the Chambers of Commerce and a source in a political party close to the state familiar with the plan. The move, which Mada Masr reported was one of several on the table to reform the bread subsidy, will see bread sold at market rates through the unified ration card and come along with significant cuts to the beneficiaries entitled to receive the subsidy.  While the timeline for the implementation of the new plan was not discussed in the meeting, Prime Minister Mostafa Madbuly previously said the government was looking at shifting its in-kind food subsidy system to a direct cash-support model during fiscal year 2026/27. For the source in the party close to the state, the removal of 10 million people from the system, a key part of the plan, will be swift, when it does happen.  “They’ll wake up one morning and find that they’re no longer on the system,” the source said, distinguishing the swiftness of the new plan to the drawn out “purifying” that has seen the Supply Ministry remove about 10 million people over the last decade.   Monday’s meeting was attended by Deputy Supply Minister Ahmed Kamal,  Chambers of Commerce head Ahmed al-Wakil, Holding Company for Food Industries head Alaa Nagy and food trade divisions representatives from various governorates.  According to the source in the Chamber of Commerce, the parties in the meeting agreed that the new support system will not involve selling rationed goods below market prices. Based on this fact, Chambers of Commerce representatives said that there would be “no need for inspections of licensed ration-goods distributors, since the goods will be sold at market prices rather than subsidized prices.”   The cash support system gives low-income households a fixed monthly sum to spend on a range of household goods but leaves them more exposed to inflation when prices rise, an impact that has already sparked criticism that the government’s plan could amount to the state “abandoning” the country’s poorest. Currently, 60.8 million citizens benefit from ration-goods subsidies, while 70 million benefit from bread subsidies.  For the past ten years, the Supply Ministry has been continuously “purifying” its beneficiary lists by periodically applying new eligibility criteria. The latest round came last week, when the ministry stopped distributing bread and other goods to people who have been cited for electricity theft or who own a unit in what the ministry considers a luxury residential compound, a recent luxury car, an imported car registered in their name or a commercial stake in a company. From fiscal year 2017/18 until the current year, the government has removed around 10 million beneficiaries from the support system, despite population growth. According to the source in the political party, the criteria to remove an additional 10 million people from the subsidy program will follow a similar logic. People will be removed based on spending and ownership criteria, the source told Mada Masr, such as whether their children are enrolled in private school or the type of car the family owns.  In addition to reducing the number of beneficiaries, the government’s proposal includes applying a regular inflation-adjustment formula to support the cash payment recipients, according to the same source.  However, that formula may not fully protect recipients from inflation as the cash system would only cover food items, whereas the overall inflation rate is calculated using a much wider basket of goods. As a result, the general rate of inflation is often significantly lower than food price inflation.  According to World Bank data, Egypt ranked among countries experiencing the highest levels of food price inflation in the world between April 2023 and March 2024, during which food inflation exceeded overall inflation by 12 percentage points.  The current food subsidy system dates back to 2014, when commodity subsidies were transformed from a “purely in-kind subsidy system into a cash-based voucher or smart-card system” as explained to Mada Masr by Sherine al-Shawarby, a professor of economics at Cairo University and an economic justice advisor to the finance minister at the time.  Following that reform, the cash value of the ration support increased gradually from LE15 to LE50. However, that amount has not changed since 2017, while the real value of the subsidy has eroded due to rising prices for goods available through the ration-card system.  In 2014, when producing a loaf of bread cost 30 piastres, bread was not included in the shift to cash support, although a limit of five loaves per person was set. Ten years later, in a landmark move, the price of a subsidized loaf was increased from five to 20 piastres, with the government subsidising each loaf by 132 piastres, according to official statements issued last year. The post Govt to merge bread subsidy into cash transfer program, cut 10 million beneficiaries from historic pillar of state support first appeared on Mada Masr.