Egypt saves on subsidies | Card holders who consume less than five loaf quota can use savings to buy other subsidized food
CAIRO (Reuters) — Egypt’s supplies minister says a smart card system for bread distribution has reduced wheat consumption by 30 percent, easing the strain of subsidies on the government’s budget and foreign reserves.
Khaled Hanafi said statistics gathered from the first stage of a reformed bread subsidy program 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.
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A pilot program 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 program 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 $5 billion a year.
The program has enabled the government to keep tabs on individual consumption of bread via the electronic cards, which are already used for other subsidized goods such as rice and sugar.
Hanafi called the pilot “a dazzling success.”
He said in March that the smart card program would be applied across Egypt within three months.
Under the scheme, smart card holders are allowed five loaves per family member per day, which officials hope can be reduced.
A points system allows citizens who consume less than the quota to spend their savings on other foodstuffs.
Under the old system, there was no limit on the amount of subsidized bread people could get.
A parallel effort to issue smart cards to drivers to monitor fuel consumption is not yet operational but is likewise aimed at gathering data the government can use when reforming its subsidy policies.
Without immediate reforms, fuel subsidies could cost nearly $19 billion in the next fiscal year beginning in July.
Egypt is the world’s largest importer of wheat, buying 10 million tonnes per year and draining 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 because 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.
However, tackling corruption and waste in a 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 subsidized loaves sold for the equivalent of one cent US.
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.”
