Egypt quadruples the price of subsidized bread

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Egypt has quadrupled the price of subsidized bread in a politically sensitive move that risks sparking social unrest as the country struggles with rising inflation.

About 70 million Egyptians, or more than two-thirds of the population in the Arab country, eat the small flat loaves, which from Saturday will be sold for 20 piastres, or E0.20 ($0.0042) each, from a price of 0.05 E. which has been fixed since 1988.

The 300 percent increase would allow more resources to be allocated to essential services, Prime Minister Mostafa Madbouly said in announcing the increase on Wednesday. He added that bread will still be heavily subsidized, costing the state 1.05 euros per loaf.

Egypt has traditionally been wary of interfering with food subsidies, riots erupted in 1977 when the prices of some basic goods rose. But the move comes as the government is trying to cut spending while facing a huge debt service bill that makes up about half the budget.

Under President Abdel Fattah al-Sisi, the former defense minister who led a popularly backed coup in 2013 against his elected Islamist predecessor, unauthorized protests are strictly prohibited and demonstrators can face prison terms.

The prices of many subsidized foods have increased in recent years, while the size and weight of bread has decreased. But cheap bread remains vital in a country where 30 percent of the population lives below the poverty line and another 30 percent stay just above it.

This movement [to increase bread prices]… is another in a series of price shocks since early 2023, said Wael Gamal, head of social and economic justice at the Egyptian Initiative for Personal Rights, a civil society group.

The state is taking bread from the mouths of millions of poor people…to pay off debts that they are not responsible for and have not benefited from.

Egyptians have faced rising inflation since 2022, when Ukraine’s full inflation from Russia triggered $20 billion in outflows as foreign debt investors sold their holdings.

That plunged the heavily indebted country into a crippling foreign currency crisis that hampered imports, including key agricultural commodities, driving up prices. Annual inflation has moderated, but still stood at 32.5 percent in April.

The government had borrowed heavily in the past decade to finance a huge infrastructure program, including a grand new administrative capital that is under construction.

In March, the government moved the Egyptian pound to a flexible exchange rate to secure an $8 billion loan deal from the IMF. The pound now trades at E47 to the dollar, down from an official rate of E31 before it switched to a floating rate. This has further eroded the purchasing power of families who continue to struggle to make ends meet.

The IMF loan is part of a $55 billion international bailout that has helped prevent a bigger economic crisis in the country.

However, the increase in the reduced price of bread showed that the bailout has yet to bring any improvement in Egyptians’ incomes and living standards, analysts said.