Egypt Eyes Bread Subsidy Overhaul as Global Inflation Bites

Egypt is considering replacing the popular bread subsidy with cash payments to the poor to protect the budget from a sharp rise in international wheat prices (Reuters)
Egypt is considering replacing the popular bread subsidy with cash payments to the poor to protect the budget from a sharp rise in international wheat prices (Reuters)
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Egypt Eyes Bread Subsidy Overhaul as Global Inflation Bites

Egypt is considering replacing the popular bread subsidy with cash payments to the poor to protect the budget from a sharp rise in international wheat prices (Reuters)
Egypt is considering replacing the popular bread subsidy with cash payments to the poor to protect the budget from a sharp rise in international wheat prices (Reuters)

Egypt is considering replacing a popular bread subsidy with cash payments for the poor to protect the budget from soaring global wheat prices, but domestic inflation could make the government opt for a less ambitious reform.

Under the existing program, more than 60 million Egyptians, or nearly two thirds of the population, get five loaves of round bread daily for 50 cents a month, little changed since countrywide “bread riots” prevented a price hike in the 1970s.

The handout is a lifeline to the poor, but is widely criticized as wasteful. High global prices for wheat, which Egypt imports on a vast scale, led President Abdel Fattah al-Sisi to say last year that it was time to tackle the bread subsidy.

Ali Moselhy, the minister in charge of subsidies, told Reuters that inflation, which has climbed in recent months to 6% from 4% earlier in 2021, made it harder to replace the support for bread and other food with cash handouts.

“When inflation is stable, then you can introduce cash,” he said.

Moselhy has said he personally favors giving people money specifically to buy bread. Eligible Egyptians already get a monthly $3.20 voucher for other subsidised food.

However, he said a broader idea to introduce unconditional payments, favored by many economists as the most efficient welfare system, risked driving up prices by putting more cash into circulation at a time of rising inflation.

The government aims to draw up a plan for reformed food subsidies in time for March budget preparations, officials have recently said.

Moselhy said that for now, the government had not taken a decision on what to do, and was focused on improving the database of recipients, with the intention of “finding out who needs what.”

That could mean that any changes are more limited in nature, perhaps trimming the program through means testing, restricting how many people in a household are eligible, or increasing the price of subsidized bread.

Bassant Ibrahim, 36, a housewife living in Beheira, north-west of Cairo, said any such restrictions should not hurt families like hers, which relies on the subsidies to bolster her husband's $180-a-month teaching salary and feed four children.

"There are rich people with cards who you can sift out, but the poor shouldn't have to pay the price," said Ibrahim, who said the family daily ate the ten loaves of bread they received, sometimes finishing them by lunchtime.

Ahmed Mohamed, 24, a married gardener in Cairo with two children, said he could live without the government paying for his daily bread.

"There are other people who need it more than I do," he said.

However, Ahmed Darwish, a former minister who oversaw a transition to a smart subsidy card system in the early 2000s, said authorities would have to step carefully to reassure people that any changes will not leave them overly exposed.

"Until the government says that this subsidy would be increased with inflation, they have to comfort people," Darwish said.



Oil Gains on Supply Concerns from Iran Sanctions, Strong Refining Margins 

The sun rises as an oil pumpjack labors Monday, Feb. 24, 2025, in Hobbs, N.M. (AP)
The sun rises as an oil pumpjack labors Monday, Feb. 24, 2025, in Hobbs, N.M. (AP)
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Oil Gains on Supply Concerns from Iran Sanctions, Strong Refining Margins 

The sun rises as an oil pumpjack labors Monday, Feb. 24, 2025, in Hobbs, N.M. (AP)
The sun rises as an oil pumpjack labors Monday, Feb. 24, 2025, in Hobbs, N.M. (AP)

Oil prices rose for a second day on Tuesday as fresh US sanctions imposed on Iran increased concerns supply might tighten and as global refining margins remained strong.

Brent crude futures rose 38 cents, or 0.5%, to $75.16 a barrel by 0401 GMT. US West Texas Intermediate crude futures gained 47 cents, or 0.7%, to $71.17 a barrel. Both contracts gained in Monday's session after a $2 drop last Friday.

"In the short term, I continue to think crude oil is looking for a base. The fresh US sanctions announced on Iran overnight will likely assist with this as will the Iraqi oil minister’s commitment to reign in its oversupply," said IG market analyst Tony Sycamore.

The US on Monday put new sanctions on more than 30 brokers, tanker operators, and shipping companies for their role in transporting Iranian oil. President Donald Trump has said he wants to bring Iran's crude exports to zero.

Iran is the third-largest producer in the Organization of the Petroleum Exporting Countries, pumping 3.2 million barrels per day in January, according to a Reuters survey of OPEC output.

For now, fuel demand strength in the West is also supportive of oil markets, some analysts say.

"Globally complex refining margins are looking robust, with strong fuel oil and distillates crack, particularly in USGC and NEW benefiting from the heating oil demand from the cold snap," said Sparta Commodities analyst Neil Crosby in a note, referring to the US Gulf Coast and Northwest Europe.

Margins for a typical refinery in Singapore processing regional benchmark Dubai crude averaged $3.5 a barrel in February so far, compared with $2.3 a barrel last month, LSEG pricing data showed.

However, gains overall were capped by the uncertain demand outlook.

Trump said on Monday that tariffs against Canadian and Mexican imports scheduled to start on March 4 are "on time and on schedule" despite efforts by the two trading partners to address Trump's concerns about border security and fentanyl. Analysts say the tariffs would be bearish for global oil demand growth.

In Europe, Ukraine hosted European leaders to mark the three-year anniversary of Moscow's invasion, but US officials stayed away in an illustration of Trump's move closer to Russia.

The market has viewed Trump's warming relations with Moscow as a potential signal of an easing in the sanctions on Russia, which would add to global oil supply.

"While there are hopes of an end to the war in Ukraine, I don’t think it’s very likely under the terms that Russia and the US are pushing for and without widespread support from a revitalized Europe," said IG's Sycamore, adding the conflict could still be supportive for oil markets in the near term.