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IMPORTS TO BE REDUCED

Egypt smart-card system cuts wheat consumption

Cairo, May 11, 2014

Egypt's supplies minister said on Saturday a smart-card system for bread distribution rolled out in one Egyptian city had reduced wheat consumption by 30 percent, easing the strain of subsidies on the government's budget and foreign reserves.

Khaled Hanafi told Egyptian state television that statistics gathered from the first stage of a reformed bread subsidy programme in the Suez Canal city of Port Said showed a marked drop in consumption.

"The amount of consumption dropped by 30 percent, which means wheat imports will be reduced by the same percentage and the demand for foreign currency will be reduced by the same percentage," he said.

A pilot programme began in Port Said last year before President Mohamed Mursi was removed from power.

The army-backed government that took over unrolled the first stage of its programme a few weeks ago in the same city, in an attempt to find a solution to Egypt's corrupt and wasteful bread subsidy regime, which costs around $5 billion a year.

The programme has enabled the government to keep tabs on individual consumption of bread via the electronic cards, already used for other subsidized goods such as rice and sugar.

Hanafi called the pilot "a dazzling success" in comments published by state news agency Mena.

He told Reuters in March that the smart-card programme would be applied across Egypt within three months.

Under the scheme, smart-card holders are allowed five loaves per family member per day, a number that officials hope can be reduced. A "points system" allows citizens who consume less than the quota to spend their savings on other foodstuffs.

Hanafi predicted on Saturday that this component of the programme would inject 500 million Egyptian pounds ($70.97 million) into the Egyptian market and create 80,000 jobs.

Under the old system, there was no limit on the amount of subsidised bread people could get.

A parallel effort to issue smart cards to drivers in order to monitor fuel consumption is not yet operational, but is likewise aimed at gathering data the government can refer to when reforming its subsidy policies. Without immediate reforms, fuel subsidies could cost nearly $19 billion in the next fiscal year beginning in July.

TALL ORDER

Egypt is the world's largest importer of wheat, purchasing about 10 million tonnes per year, draining its hard currency reserves to provide the poor with a disc-shaped loaf.

A slide in the Egyptian pound's value since December 2012 is pushing up the bill, as much of the wheat has to be bought for dollars on international markets.

Government officials admit that costly subsidy spending is a drag on an economy badly hit by more than three years of political turmoil following the 2011 uprising.

But tackling corruption and waste in the bread supply chain that has been untouchable for decades is a tall order, and one cash-strapped government after another has resisted attacking the problem.

Authorities hope to avoid protests over subsidised loaves sold for the equivalent of 1 US cent.

President Anwar Sadat triggered riots when he cut the bread subsidy in 1977, while President Hosni Mubarak faced unrest in 2008 when the rising price of wheat caused shortages. One of the signature chants in the 2011 uprising against Mubarak was: "Bread, freedom and social justice." - Reuters




Tags: Egypt | wheat | subsidy | Bread |

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