CAIRO: Egypt will stop subsidising flour for its sweeping bread subsidy programme next month in a move expected to cut wheat imports by up to 10pc by curtailing smuggling, the supply ministry said on Wednesday.

Egypt, the world’s largest wheat buyer, is looking to tighten its finances as it pushes ahead with a $12bn three-year International Monetary Fund loan programme tied to ambitious reforms such as subsidy cuts and tax increases.

Austerity-hit Egyptians faced with inflation above 30pc have increasingly turned to the state’s cheap subsidised bread to make ends meet, increasing the country’s food subsidy bill as well as its wheat imports. In the financial year to Jun 30 wheat imports reached 5.58m tonnes, up from 4.4m the preceding year.

In an attempt to reduce waste the state will next month stop subsidising flour used by bakeries offering the cheap bread. Instead, it will restrict subsidies to the actual bread offered to consumers, Supply Ministry spokesman Mohamed Sweed said.

Subsidy card holders currently obtain each loaf of bread for 0.05 pounds, less than a tenth of the cost of production, via an electronic smart card that allocates a maximum daily ration to citizens and compensates bakeries for the production cost shortfall with every swipe.

Unscrupulous bakers have long bought up cheap subsidised flour and sold it on the black market, costing the state millions of dollars a year in squandered subsidies.

Sweed said the new measure will remove the incentive for smugglng flour, cutting down on waste and helping to save the state up to 8bn Egyptian pounds ($447m) from its 2017-18 food subsidy bill, which had been set at 85bn pounds.

Published in Dawn, July 13th, 2017