Egypt inches towards far-reaching food subsidy reform

Egypt, once the breadbasket of the ancient Roman empire and now the world's biggest wheat importer, is paying a hefty price to keep its citizens fed with cheap loaves and other foodstuffs.

The $5.5 billion which it spends each year on food subsidies, mostly on wheat, is a burden that it can ill afford as the economy falters and the budget deficit balloons after the uprising that ousted president Hosni Mubarak in February.

But the financial pressure is not the only cost of the subsidy system; subsidies have distorted Egypt's agriculture. Bread is so cheap that it is sometimes used as animal feed. A focus on imports has led to neglect of farms at home. Produce often rots before it ever reaches market.

Now the country's post-Mubarak government is inching toward far-reaching reforms of the system. No one talks of scrapping subsidies altogether -- the uprising against Mubarak was partly fueled by anger at the deep divide between rich and poor. But experts say the financial burden could be reduced and cash more usefully spent on strengthening the agriculture sector.

"We need a radical shift in the way we deal with our bread subsidy system," Social Solidarity Minister Gouda Abdel Khaleq told a seminar this month on food security in Egypt. His ministry is in charge of the country's main wheat buying organization and other bodies that handle subsidized foods, though any reform will also need input from the finance and agriculture ministries.