Egypt hikes subsidized bread price for the first time in decades

CAIRO — Egypt’s cabinet decided Wednesday to raise the price of subsidized bread for the first time in 30 years, Prime Minister Mostafa Madbouly said.

The price of a loaf, long set at five piastres ($0.001), would quadruple to 20 piastres ($0.004) from June 1, Madbouly told a news conference.

Madbouly acknowledged the move would be unpopular but emphasized the need to “rationalize the burden on the state treasury to ensure the sustainability of subsidies”.

Of the country’s 106 million people, 71 million benefitted from bread subsidies, he said.

While the official price of a subsidized loaf has remained stable for three decades, consumers report its size has progressively shrunk.

Cairo has been suffering its worst economic crisis for two years, with the currency losing two-thirds of its value and inflation soaring to a record 40 percent last year.

READ: IMF confirms increasing Egypt’s bailout loan to $8B

Egyptians, many of whom lived at or below the poverty line before the crisis, have dipped into life savings to cope with rising food prices, which saw over 70 percent inflation last year.

$50-B bailout

Earlier this year, Cairo received a bailout of over $50 billion in loans and investment deals from the International Monetary Fund, the World Bank, and the United Arab Emirates.

These deals included promises of reforms, such as limiting the state’s role in the economy and enacting policies to rein in inflation.

The government has signaled wide-reaching subsidy reforms, including plans to lift subsidies on fuel and electricity.

Recently, officials have reduced fuel subsidies and raised public transportation prices but avoided changing bread subsidies — a staple food and symbol of Egyptian livelihood.

READ: Cash-strapped Egypt sells state assets to Gulf nations

President Abdel Fattah al-Sisi has long argued that the pegged bread price was unsustainable for state coffers.

Madbouly also said Wednesday the government was considering moving towards a “cash subsidy” model.

Last year’s budget allocated 529 billion pounds ($11.2 billion) to subsidies, about a sixth of the total budget, while debt servicing accounted for over a third of the budget, or 1.12 trillion pounds.

Cairo’s foreign debt has more than tripled over the past decade to a record $165 billion, according to central bank figures.