Russia-Ukraine war and Egypt’s bread prices

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At a small mosque in Cairo’s middle-class neighborhood of Agouza, the traditional Friday prayer sermon was not about how Muslims should behave, or proper religious practices. Instead, it was about bread, known in the local Egyptian Arabic dialect as eish or simply “life”.اضافة اعلان

The mosque preacher made an emotional appeal to bakery owners and merchants not to increase the price of bread and other basic commodities such as sugar, rice, cooking oil, and tea.

“Appreciate the tough conditions people are going through. Do not be greedy. Honest merchants are on an equal footing with martyrs and prophets on Judgment Day,” he said.

Barely one week after Russia launched its military invasion of Ukraine on February 24, and with no shortage in the government’s four-month strategic reserve of wheat, the price of one ton went up in the local market from 9,000 Egyptian pounds to 11,000 Egyptian pounds. Prices increased sharply again after the government suddenly decided, on March 21, to devalue the local currency for the second time in five years, losing 14 percent of its value. Overnight, $1 went from 15.65 Egyptian pounds to 18.20 Egyptian pounds. Thus, the import bill increased amid a rapid decline in nearly all sources of hard currency, particularly tourism.

Egypt is the world’s largest importer of wheat, with nearly 85 percent coming from Russia and Ukraine. Egypt imported over 6 million tonnes of wheat in 2021, at a total cost of $2.4 billion. Russia exported 4.2 million tonnes to Egypt for $1.2 billion, and Ukraine 651,400 tons for $650 million.

The sharp increase in the price of wheat was immediately translated into a 25 percent rise in the price of popular kinds of bread other than the government’s subsidized variety — available, with other essential goods, on computerized ration cards — which the vast majority of Egypt’s over 100 million people heavily rely on. The government claims it provides subsidized bread for 80 percent of Egyptians, up to five loaves a day for every family member on the ration cards, while any additional bread has to be bought on the private market.

Egyptians have historically called bread eish or “life” for one key reason: it is the cheapest and most filling food for the country’s poor, affordable even for those who live below the poverty line. Unlike countries in Southeast Asia, or even nearby Arab Gulf states, Egyptians do not primarily consume rice. The logic for the poor in dealing with bread is: eat as much as you can of the local small rounded flat bread at the cost of 5 piasters, or $0.00318, made up of wheat and grains, preferably with a filling, and your hunger will be kept at bay.

According to official figures, Egyptians consume nearly double the global average of 70–80kg of bread per person, at an estimated 150–180kg. Egypt’s local wheat production of nearly 9.0 million tonnes is less than half of its local consumption, totaling 21.3 tonnes. Apart from a concerted effort to plant fewer water-intensive crops to conserve water, government officials have usually justified the shrinking local wheat production by claiming that encouraging farmers to produce crops that can be exported abroad would provide the cash needed to import wheat at reasonable prices. The non-subsidized bread sold in the local market for between 50 piasters and 2 Egyptian pounds, before leaping by 25 percent after the start of the Ukraine war.

Notwithstanding the myriad pressures the Russia-Ukraine war had placed on the Egyptian economy, among them another crushing blow to a tourism industry still trying to struggle to its feet, and a sharp increase in energy prices, the government has been trying to maintain calm amid the increase in prices for basic commodities, including bread.
The sharp increase in the price of wheat was immediately translated into a 25 percent rise in the price of popular kinds of bread other than the government’s subsidized variety — available, with other essential goods, on computerized ration cards — which the vast majority of Egypt’s over 100 million people heavily rely on.
On March 15, Egyptian President Abdel-Fattah El-Sisi chaired a meeting with the prime minister, minister of defense, chief of intelligence, and ministers of interior and food supply to discuss the needs of Egypt’s markets ahead of the beginning of the holy month of Ramadan, a religious occasion during which Egyptians consume greater than average amounts of food.

According to the presidency spokesman, Sisi instructed that local authorities should tighten their control over the markets and set a fixed price for bread sold outside the subsidy system. On March 22, the government announced a fixed price for such bread, ranging between 50 piasters and 1 Egyptian pound, with a warning to would-be violators.

Shortly after the International Monetary Fund (IMF) announced that it was negotiating yet another loan with Cairo to cope with the new economic difficulties, Sisi sought to reassure Egyptians on March 24 that they did not need to worry about the availability of basic food commodities.

“We have enough for a reasonable number of months to come,” Sisi said.

With Egypt’s wheat harvest season expected to start in mid-April, along with its four months of reserves, the government should have enough wheat for the next nine months, during which time the Russia-Ukraine war may come to an end. The government has also said it is ready to provide wheat from other markets, considering that supplies from Ukraine have come to a halt and Russia’s share may decrease if the war goes on for a long time.

The story of Egypt’s local, so-called baladi bread has been a long and complicated one. Since the 1952 military coup overturned the monarchy and the late Egyptian president Gamal Abdel Nasser adopted the socialist model, alongside close ties with the former Soviet Union, the social contract between the government and the majority of the poor population has been simple: The government provides very low salaries in return for subsidized good and cheap services.

Former presidents Anwar Sadat, and his successor who was removed in a popular revolt on January 25, 2011, Hosni Mubarak, kept that contract alive, despite a total shift in economic policies and political alliances, becoming a key US ally and liberalizing the economy. One of the key demands of the uprising against Mubarak 11 years ago was to increase the minimum wage and improve living conditions. The key slogan protesters chanted in Tahrir Square was “bread, freedom, and social justice”.

On paper, and according to official figures produced by the Egyptian government and the IMF, the Egyptian economy was achieving unprecedented growth levels under Mubarak, averaging 7 percent. However, the majority of the country’s population remained poor, with average salaries ranging between $70 and $100 a month.

President Sisi took office in June 2014, after former president Mohamed Morsi of the Muslim Brotherhood was removed following massive protests against him. Sisi has pushed even further than his predecessors in liberalizing the economy and reducing government subsidies. The devaluation of the local currency in November 2016, a daring move that doubled the prices of nearly all imported goods in a country that heavily relies on imports, severely blunted the impact of any small increases in salaries approved by the government to cope with the high level of inflation. Sisi has personally approved two increases in the minimum wage, which now reaches 2,700 Egyptian pounds or $148, but they have not kept pace with the rising prices for goods and services.

Bread, in particular, is considered the litmus test for the popularity of any Egyptian government, if not its stability and survival. When Sadat started liberalizing the economy, he approved a slight increase in the price of bread. That led to the infamous “bread riots” of 1977, in which mobs attacked government buildings and private property, setting them on fire. Sadat had to flee Cairo to Aswan near the border with Sudan fearing for his own safety, and in a matter of a few days, he rescinded his decision and canceled the planned increase in the price of bread.

Yet, the times are different, and Sisi is not Sadat. The former defense minister and former chief of military intelligence believes that Egyptians trust him and have confidence in his intentions and desire to strengthen Egypt’s economy.

Despite the devaluation of the Egyptian pound, gradual increases in the price of oil and gas (practically ending any government subsidy) and a sharp rise in the cost of government services and many other goods, Egyptians have not revolted or taken to the streets to protest. Even before the Russian invasion of Ukraine, Sisi had publicly discussed the possibility of increasing the price of subsidized bread in August 2021, saying it was unacceptable that its price remained unchanged for 34 years.

“How come for the price of one cigarette you can buy 20 loafs of baladi bread?” said Sisi in statements.

Despite his obvious willingness to push the reform envelope, under the banner of building “a new republic”, Sisi has not followed up on his declared desire to increase the price of subsidized bread over the past six months. As soon as his statements on bread were reported, local media was full of reminders of the 1977 bread riots and warnings to officials that people have had more than enough already in terms of economic hardships and price increases over the past eight years, and cannot take any more.

One outcome of the Russia-Ukraine war might be to open the door for a possible increase in the price of subsidized bread for the first time in decades, taking the onus off the government, which will not have to cite the need to reform the economy or reduce the budget deficit. It is enough to blame an outside war that is putting the whole world economy on hold, coming on the heels of the heavy, as yet unmitigated, losses caused by two years of fallout from the pandemic.

The writer is the deputy editor-in-chief of Al-Ahram Weekly and former president of the social-liberal Dostour Party.

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