Where a Small Loaf of Bread Is a Big Problem

Everything about Egypt’s subsidized bread is colossal…except the size and price of the loaf:

Reuters

Subsidized Bread

For decades, the Egyptian government has made sure that close to 70 million poor households have food on the table. For all whose income qualifies, a subsidy card is available. With the card, holders can buy up to five loaves a day for each of the people they live with. Vastly discounted, the loaf had a .05 pound price. Even with a recent price hike to .20 pounds, it is inexpensive. Still, consumers say they cannot afford the increase, the first since the 1980s.

To produce 100 billion loaves of bread annually, the government needs a lot of wheat. Of an estimated 8.5 metric tons, the majority of its wheat imports has come from Russia and Ukraine. As you would expect, the war diminished supply and raised prices.

Because of Egypt’s weak currency, those prices remained high even when the global price of wheat recently declined:

Our Bottom Line: Bread Economics

More than food, bread takes us to subsidies, global commodity markets, and sovereign debt.

We can start with subsidies. As money provided to a producer or buyer, a subsidy lowers the price of a commodity. Consequently, we wind up with market distortions because supply and demand are skewed by government.

Those distortions were fueled further by the impact of the Ukraine invasion on commodity prices. Especially in the developing nations like Egypt that depend on wheat imports, food security has been threatened:

Finally, a subsidy can be expensive. Pouring out of government’s coffers, it is fiscal policy that Egypt could not afford. As a result, its debt has soared. Now, needing more, because the IMF said they needed to control spending, the price of bread went up. But the worry about unaffordable debt remains.

My sources and more: To learn about Egypt’s subsidized bread, Reuters has it all, here and here. Then, as the ideal complement, this paper discussed threats to food security in the developing world.

Our featured image is from Pixabay.