Egypt Cuts Subsidized Food Allocations to Battle Economic Crisis
(Bloomberg) -- Egypt is reducing the amount millions of people can claim under a subsidized food program, part of an effort to revamp a costly welfare system amid the country’s biggest economic crisis in years.
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Under new rules issued by the Supply Ministry late Tuesday, ration-card holders — which make up about 60% of the 104 million population — will see their monthly allocation of subsidized sugar halved to one kilogram per person, or four kilograms for a maximum of four people on the same card.
The amount of subsidized cooking oil remains at one 800ml bottle, though the price for that and sugar will go up by 20%.
The changes reflect the challenges facing Egyptian officials as the North African nation grapples with its worst foreign-currency shortage in decades and is under pressure from potential donors, including regional allies, to enact painful reforms. Those include the sale of state assets and the potential devaluation of the currency for a fourth time in just over a year.
The previous three currency devaluations helped Egypt secure a $3 billion International Monetary Fund package, though that hasn’t eased investor concerns.
Fitch Ratings earlier this month cut Egypt deeper into junk status, while S&P Global Ratings reduced the outlook to negative. Moody’s Investors Service on Tuesday put the country’s ratings on review for a downgrade.
Annual inflation, while slowing in April, remains above 30% and food prices are up over 56%.
In an effort to offset the pain for Egyptians and avoid social unrest, the new budget for fiscal year 2023-24 starting July 1 will see the government raising funding for social programs by almost 48% compared with the current year.
Finding money to raise spending isn’t easy. Officials are still waiting for billions of dollars pledged by Gulf Arab states that have yet to materialize.
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