The subsidy system in Egypt is in crisis. Subsidies hardly reach those who need them, and if they do, some staple subsidized goods have been missing over the past two months. Rice, for example, has been absent from the Ministry of Supply’s (MoS) outlets for the second month in a row, while sugar has not been available for the first time in years.

The subsidy system in Egypt is in crisis. Subsidies hardly reach those who need them, and if they do, some staple subsidized goods have been missing over the past two months. Rice, for example, has been absent from the Ministry of Supply’s (MoS) outlets for the second month in a row, while sugar has not been available for the first time in years.

Many Egyptian families rely on state subsidies. According to the latest statistics published by the Central Agency for Public Mobilization and Statistics (CAPMAS), the average weekly income in Egypt amounts to L.E. 806 (90 USD), while the average annual family expenditure is L.E. 35,000 (3,940 USD) in urban areas compared to L.E. 26,8oo (3017 USD) in rural areas.

20 million ration cardholders

Created between the two World Wars, the MoS is the oldest ministry in Egypt. When the Republic was established in 1953, the government played a role in producing and distributing commodities to achieve food security. Over the years, the government provided people with different types of consumer goods, ranging from cooking oil (cottonseed oil), rice, sugar, bread and fuel. At present, the subsidy system provides 20 million ration cardholders with food support, including oil, sugar, and rice, worth L.E. 15 (1.4 USD) per individual a month.

The smallest ration consists of two bottles of cooking oil, one bag of sugar and one bag of rice, in addition to five loaves of bread per day. Since February 2015, eligible people have had the opportunity to choose between small-size bran bread and the smaller baguette loaves. Last September and October, ration cardholders got more cooking oil to compensate for the unavailability of sugar and rice.

100 subsidised products

These benefits are provided free of charge, while 50 low-priced items are offered by 34 MoS industrial companies that produce soap, oils, flour and refined sugar. These products are sold at state-owned market outlets, cooperatives, at reduced prices where a bag of rice and local meat are cheaper than in local markets. The government aims to increase the number of subsidized products to one hundred.

The subsidy system was recently placed under the ambit of the Ministry of Military Production (MoMP). Nevertheless, the absence of basic food products continues.  The MoMP ration cards were issued in cooperation with Visa for protection of the subsidy system’s data. The MoMP has also launched new low-priced foods on the market, especially red meats.

The government has also maintained subsidies of fuel of natural gas and engine fuels. In July 2014, however, the government started to cut back subsidy volume: gas subsidies decreased from L.E. 100 billion (approx 6.4 billion USD) to 60 billion (approx 3.85 billion USD), causing prices to rise by 75 percent. New price increases are anticipated when new cutbacks on government subsidy of fuel are introduced in the near future under the International Monetary Fund’s (IMF) reform program.

Social welfare, not subsidies

Following sixty years of state subsidies, the government recently decided to provide financial support to needy individuals instead of commodities. Every citizen was previously entitled to subsidies, including richer families: now subsidized commodities and hand-outs are income-assessed.

The government recently launched two new programs, Takaful and Karama, to provide social welfare to one million families. The government contributes L.E. 4.1 billion (263 million USD) to these two programs, of which L.E. 1.4 billion (90 million USD) is part of an IMF credit of L.E. 400 billion (257 million USD) to the Ministry of Social Solidarity. The government has only received two payments thereof, amounting to L.E 230 million (14 million USD). The question remains as to the kind of subsidy offered by the government to support citizens. The Karama program’s support does not exceed L.E. 350 (22.5 USD) per person  p/month , while the quarterly subsidy paid to struggling families under the Takaful program is L.E. 325 (21 USD).

To be eligible for Takaful, a family must have children aged less than 18 who are either in school or supervised by the health units of the Ministry of Health until the age of six. The payment offered to each family increases by L.E. 60 (3.8 USD) if it has an elementary school child, L.E. 80 if it has a middle school child and L.E. 100 (6.4 USD) if it has a child in high school.

Although the government has set numerous conditions to ensure that subsidies only reach the eligible, it has failed to consider that what it offers is basically modest. Beneficiaries of the social protection program receive less than the IMF’s global poverty line estimates of US$ 1.9 a day (over L.E. 505 a month),

Some subsidies backfire and create loopholes for corruption. The bread subsidy, for example, is administered through the government’s provision of flour. This method, however, led to manipulation by bakeries where the subsidized flour was used for sweet production, while a percentage of the produced bread was used as animal fodder. The government now deposits the the difference between the actual price for producing a loaf of bread and its subsidized cost, i.e. about 45 piasters each, directly into the baker’s bank account. Every citizen receives 899 free loaves of bread a year, based on CAPMAS figures.

Army & fake army

Over the last years, the army has increased its production of food commodities. It has also intensified its efforts to launch alternative meat markets at reduced prices over the past three years. This initiative has helped solve the crisis of skyrocketing prices. However, the quantities offered are insufficient. Critics have suggested they serve certain political gains too.

The MoS has recently published an announcement advising citizens about how to recognize the army vehicles that sell food products. Undersecretary of the MoS in Dakahlia Governorate presented this advice following the sale of bad products in the governorate by three fake vehicles with army logo.

The undersecretary urged citizens to ensure that the vendor is an army officer accompanied by two soldiers. A vehicle must carry the National Service Project’s logo and the products must be well packaged with the words ‘Subject to integrated veterinary inspection by the Veterinary Services Administration’ written on them.

Disneyland in Suez?

The government is also studying projects like converting used cooking oil into biofuel and establishing an international trading and marketing city at Suez Canal district, built on area of 4.2 million square meters. The city will consist of quarters modeled on Arab towns or world landmarks. It will also include an entertainment themepark similar to Disneyland, according to MoS’ website. The pictures published on the project website include Eiffel Tower, Statue of Liberty, Big Ben and Taj Mahal. The investment value of this project amounts to L.E. 40 billion (approx 2.5 billion USD), at a time when the MoS and MoMP are still unable to secure commodities for ration cardholders.