Friday,21 September, 2018
Current issue | Issue 1128, 27 December 2012 - 2 January 2013
Friday,21 September, 2018
Issue 1128, 27 December 2012 - 2 January 2013

Ahram Weekly

Not enough to go round

The depletion of Egypt’s foreign reserves and steady devaluation of the pound have raised fears that basic food commodities might become harder to find, Mona El-Fiqi reports

Al-Ahram Weekly

Ola Ahmed, a housewife and mother of three children, is worried she might suddenly be unable to find food for her family. “We all know that there are big challenges facing the economy since the revolution but I am really afraid that it would mean food shortages. What shall we do then?” Ahmed asked.

Though consumers are starting to worry about finding their basic food stuffs during the coming period amid a decline in the foreign currency reserves, officials assert that everything is under control and that local needs are covered for the next three months.

Public concern has increased with the deterioration of the Egyptian economy, the continued lack of hard currency revenues and the subsequent depletion of foreign reserves down to $15 billion by the end of November. Their fear is very much in place given that Egypt is a net food importer and the world’s largest wheat importer. Egypt imports almost 50 per cent of its annual wheat consumption, 35 per cent of corn and 90 per cent of oil producing plants.

The government is squeezed between high demands and narrow resources combined with limited local food production.

Egypt’s population is growing fast — every 23 seconds a baby is born. The steady, more recently quicker, depreciation of the pound is an added burden. The dollar was selling this week for LE6.2 compared to LE6 just a few months ago.

In response to public anxiety, Minister of Supply and Internal Trade Abu Zeid Mohamed Abu Zeid, announced on Sunday that Egypt has enough reserves of strategic commodities.

According to a report by the General Authority for Supply Commodities (GASC) and presented recently to Abu Zeid, Egypt currently has 4.2 million tonnes of wheat reserves that cover local needs till the end of May 2013.

As for sugar, Abu Zeid explained that there are 350,000 tonnes, enough till the middle of March. Moreover, 260,000 tonnes is the amount of cooking oil currently available for ration card beneficiaries that covers their needs till the end of February.

Abu Zeid said distribution companies have supplies of 117,000 tonnes of rice and that 265,000 tonnes will soon be delivered, enough to cover consumption for three months.

Ali Sharafeddin, head of the Cereals Division at the Federation of Egyptian Industries, also told Al-Ahram Weekly: “Our wheat supplies are in normal averages since we usually keep reserves for three months in advance.” However, he warned that “Egypt has a real problem because of its shrinking foreign currency reserves.”

Moreover, Sharafeddin expects that the food imports bill will increase this year due to higher global prices. “The wheat imports bill will reach LE12 billion this year.”

Egypt’s Ministry of Finance has not revealed the wheat price it is relying on in the 2012/13 budget. However, allocations for total food subsidies have reached LE26.6 billion, which include wheat, sugar, oil and rice.

For many consumers, while the high cost of imported wheat will not be felt directly on account of the country’s subsidy programme, increases in the non-subsidised wheat flour price will cause prices of other wheat products to rise.

The increase in Egypt’s food imports bill is due to soaring prices in international markets. Global wheat prices have been on the rise due to less than expected supplies. Dry weather has been reducing crops from Australia to Eastern Europe, while demand is increasing in North Africa. Moreover, Russia, Ukraine and Kazakhstan were hit by droughts this year, which reduced their grain harvest by a third. Total international wheat production is expected to fall by 6.1 per cent to 653.1 million tonnes this year.

The GASC imported wheat needed for producing subsidised bread is expected to absorb around LE16 billion of the country’s budget in the fiscal year 2012/2013, 50 per cent higher than in 2011/2012 and representing around 60 per cent of total food subsidies, according to the Finance Ministry. Subsidised baladi bread sells for five piastres a loaf while it costs the state budget 35 piastres. From a social perspective, subsidised bread is a must as roughly 40 per cent of Egyptians live on less than $2 a day, according to the World Bank.

In an attempt to increase wheat self-sufficiency, local production witnessed a remarkable increase going from 7.1 million tonnes in 2009/2010 to 8.3 million tonnes in 2010/2011. Due to the increase of local wheat supplies this year, Egypt is expected to import less wheat than usual. Egypt’s main state wheat buyer GASC expects to import 4.8 million tonnes of wheat in fiscal year 2012/2013, down from 5.3 million tonnes last year.

Even with decreased imports, the increase in international grain prices is likely to add substantially to the national food import bill. In order to mitigate the impact of additional increases in international prices, GASC has already issued several tenders purchasing wheat of various origins, including Russia, Ukraine and Romania.

An increase in domestic wheat production means Egypt can gradually wean itself off imports. Heba Al-Leithi, professor of economics at Cairo University, said that increasing local wheat production this year is a positive indicator. However, Al-Leithi said that efforts should be exerted to reduce the cost of wheat imports. She said the government should minimise the waste of wheat which is estimated at 20 per cent due to bad storage.

The government should also work to reduce the administrative costs paid through the importing process since Egypt is rated as the first in the Arab countries in administrative fees. Moreover, the government should reconsider the subsidised bread production system which also leads to much waste of the money allocated for bread. It would be better, according to Al-Leithi, if the bread subsidy is applied on the end product to avoid the sale of subsidised wheat on the market for a higher price.

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