Government raises food subsidies by 20% per citizen for weakening Egyptian pound

Egypt’s economic ministries decided on Tuesday to raise food subsidies by 2.4 billion Egyptian pounds, boosting each citizen’s subsidy by 20 percent, the cabinet said in a statement.

The new subsidy will take effect starting June, when the holy month of Ramadan is expected to start, raising consumption of food and, by extension, prices.

Earlier this week, Egypt’s President Abdel-Fattah al-Sisi commissioned the government to increase the supply of subsidised basic commodities into local markets to compensate low-income earners for food price hikes caused by the fluctuating US dollar price in recent months.

In mid 2014, Egypt introduced a new food subsidy system whereby citizens hold smart cards entitling them to a monthly ration at EGP15 per individual in addition to five loaves of bread a day at the subsidised price of EGP0.05 a loaf, lower than the market rate of EGP0.3.

The exchange rate saw the pound strengthen on the black market, where the dollar was sold for EGP 10.4, higher than its rate last week when the dollar was sold for 11.5, while the official rate remains stable at EGP 8.78.

The price of the greenback has been slowing since the Central Bank of Egypt (CBE) revoked the operating licenses last week of nine foreign exchange bureaus who were proven to have repeatedly manipulated and speculated on the dollar.

Egypt, which relies heavily on imports of wheat and other staples to feed its population of 90 million, saw its pound drop by over 14 percent of its value against the dollar last month.

Egypt’s annual headline inflation eased for the third consecutive month to 9.2 percent in March 2016 from 9.5 percent in February, compared to 11.8 percent in the same month last year.

The government also sought to encourage investors to establish large chains of supermarkets to offer staple commodities at lower prices. So far 16 markets have been established with investments worth EGP5.3 million, the supply ministry said on Tuesday.

source: Ahram Online