In Egypt, if a passer-by spots a piece of bread in the street, the morsel is usually not ignored but picked up and placed reverently on a ledge away from passing feet. Bread is ’aish – life itself.
So Russia’s ban on wheat exports has significantly increased economic and political pressures on an Egyptian government that spends heavily on bread subsidises for its 80m people.
Egypt is the world’s largest importer of the grain and the provision of bread, sold for less than 1 US cent a loaf, is central to the government’s strategy for maintaining social peace.
To that end, Cairo last year obtained about 60 per cent of its wheat imports from Russia.
Despite economic growth in recent years, food subsidies remain a sensitive political issue. The price of bread in particular is deemed to be a red line, which successive governments have been reluctant to cross, fearing social upheaval.
In 1977 deadly riots erupted on the streets of leading Egyptian cities after former president Anwar Sadat tried to remove a range of food subsidies.
Since then, the authorities have been careful to ensure that some basic foods are subsidised and that cheap bread, in particular, is available to all Egyptians. “Of course it is a drain on the budget,” says Angus Blair, head of research at Beltone Financial, a regional investment bank. “Any subsidy is a drain, but in a country where so many people are poor there is no other option.”
A recent government study found that 90 per cent of families in the country consume subsidised bread and 60 per cent of them rely on it as a main item in their diet. Some 40 per cent of the population is classified as poor.
As the cost of wheat on the international market jumped, Egypt has turned to other sources for its imports, such as France and the US.
Ministers have also hastened to reassure the country that there will be no increases in the price of the subsidised loaves and that the government will absorb the estimated $400m-$700m expected to be added to an already hefty support bill.
Youssef Boutros-Ghali, the finance minister, said earlier this month that food subsidy costs for the year to end in June 2011 were likely to reach E£13.5bn ($2.4bn). Most of this will be spent on supporting the price of bread.
Economists expect the higher wheat prices will add between 0.2 to 0.4 per cent to a budget deficit that the minister had estimated at 7.9 per cent before the increased spending.
But even if the price of bread is to be maintained at the same level – where it has been since 1989 – other wheat products such as pasta, flour and unsubsidised bread, which also form an essential part of the diet of poor Egyptians, have gone up.
These price rises come in an atmosphere of high food price inflation, which has already been raising social pressures in the shape of frequent public protests.
So far these have been small and localised, but they feed into a general mood of discontent that has been deepening as the country approaches general elections in November and a presidential poll next year.
“You have to look at food price inflation in Egypt, which is the highest of any country in the world at 18.5 per cent year on year,” says Mr Blair. “When a big chunk of society earns only a few dollars a day, this kind of food inflation is unsustainable. It would be even in a mature society.”
Egyptian per capita consumption of wheat is 180kg a year – one of the highest in the world – specifically because bread is cheap, and officials say this encourages waste. Local wheat production accounts for more than half of the 14m tonnes of wheat consumed every year. The rest is imported.
Egypt’s big wheat imports are, for many critics of the government, a sign of its failure to ensure the country can rely on itself for its most basic food needs.
Speaking during this current crisis, Amin Abaza, the agriculture minister, said he aims to achieve 70-75 per cent wheat sufficiency by 2020, but that it was contingent on an overhaul of the irrigation system in the agricultural lands of the Delta and Nile valley. Egypt’s water resources are already overstretched, and only through saving water in the existing agricultural land will it be possible to reclaim more desert land.
But Tarek Tawfik, chairman of the chamber of food industries and himself a farmer and exporter, says that using scarce and therefore precious water to grow wheat in reclaimed desert land is a waste.
He points to Egypt’s rising food exports, which are largely based on growing high value-added horticultural products such as fruit and vegetables on reclaimed land, using modern irrigation techniques such as hydroponics.
“We have to change our policy of wheat consumption,” Mr Tawfik says. “Subsidised bread should be available only to those who need it – not to all people. At the moment cheap bread is not just used to feed people, but also to feed chickens, fish and farm animals.
“There is a lot of waste. We can only achieve self sufficiency in wheat if we reduce consumption.”