Egypt’s soaring bread prices are chewing a hole in the unsubsidized lower middle class

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If there is one commodity that is political in Egypt, it is not oil or natural gas; it is bread.

Cheap bread, and lots of it, is considered a birthright in Egypt. Aish baladi, a whole wheat flatbread that resembles a slightly inflated pita, is a staple of Egyptian cuisine. You can see baladis stacked in clear plastic bags in kiosks, on trolleys, even on parked cars after they emerge from the scorching ovens that fill the market streets of Cairo, Alexandria and other cities and towns.

Egyptians do not take kindly to bread price increases. In 1977, then-president Anwar Sadat cut subsidies on food items, notably bread, on the recommendation of the World Bank and the International Monetary Fund. The reaction was swift – and deadly. The so-called bread intifada triggered riots in many cities, killing about 80 Egyptians and injuring hundreds. Sadat called in the army to break up the protests but backed down on the price hikes.

Today, rising food prices are creating misery once again, but it is not the poor who are complaining – their subsidies appear sacrosanct. Instead, the victims are the lower-middle class. They do not qualify for the subsidies and their lean incomes are getting squeezed by high inflation.

The price of a single subsidized baladi is only five piastres, or less than a penny (100 piastres equals one Egyptian pound; 25 pounds equals US$1). “If you have only one American dollar, you eat bread for a whole month,” said Basem Kamel, the secretary-general of the Egyptian parliament’s small Social Democratic Party.

But the price of a non-subsidized, or “private,” baladi can be 20 times greater. Given the enormous consumption of bread and the country’s high birth rate – Egypt’s population has tripled to 110 million since the early 1970s – the cost of buying baladi alone for a family of five or six can prove daunting, even for people with regular salaries. Egyptians consume 150 to 180 kilograms of bread per person per year, more than double the global average, according to official figures.

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One Egyptian who says she is living on the edge is Dalia Fahmy, 57, a divorced mother of two who lives in central Cairo and does not qualify for subsidies.

A part-time announcer for Radio Cairo’s overseas service who has worked as a media consultant, she makes only 1,300 pounds a month, the equivalent of little more than US$50 (full-time announcers make the equivalent of about US$160 a month). While her former husband helps with the kids’ education, she says she is depleting her savings as prices soar.

“The rising food prices are hurting me a lot,” she told The Globe and Mail. “If I don’t find a full-time job, my savings will vanish and I don’t want my kids to support me, but that is what they may have to do. It will get worse for all of us, since our currency is going down.”

She said the price of non-subsidized bread has doubled since the start of the war in Ukraine. “I am buying less,” she said.

Samer Atallah, an associate professor of economics at the American University in Cairo who has a PhD from McGill University, calls Egyptians like Ms. Fahmy the “squeezed between” – the lower-middle class who are forced to buy non-subsidized food at prices that do not bother wealthier Egyptians. “They are getting crushed on a daily basis by rising inflation,” he said.

It is hard to obtain accurate numbers of how many Egyptians would fall into this hardship category. Egypt is one of the poorest countries in the Arab world, and most of its citizens receive state help of one form or another – from food and energy subsidies to funeral assistance and cash transfers to the very poor. Heavily discounted baladi, which is sold well below its cost of production, consumes the majority of food subsidies.

Attya Hamad, head of the bakers’ chamber of the Egyptian Chamber of Commerce, said 72 million Egyptians qualify for subsidized bread from 29,000 state-supported bakers, which means almost 40 million do not (Cairo allotted the equivalent of US$3.3-billion for bread subsidies alone in the 2021-2022 budget). It’s probable that many millions of them are struggling to feed their families as prices rise. “The private bakeries are increasing their prices a lot, not just because of the price of wheat, but because the price of oils, sugar and electricity are also going up,” Mr. Hamad said.

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Prof. Atallah says annual inflation (not just food prices) was running at 7 per cent to 9 per cent before the war and has almost doubled since then. According to the UN’s Food and Agriculture Organization’s food-price index, cereals, including wheat, were well off their May record high but are still more than 6-per-cent higher than a year ago.

Egypt relies on ever-higher imports – less than half the wheat it consumes is produced domestically – to feed its surging population, which grows by half the population of Toronto every year. The U.S. Department of Agriculture says that, before the war, Russia and Ukraine accounted for the bulk of Egypt’s wheat imports – 12.5 million tonnes in 2020-21 (Canada supplies small amounts to Egypt and seems likely to boost its exports now that the war has made Russian and Ukrainian exports unreliable). Egypt is routinely the world’s largest importer of wheat and one of the top 10 importers of sunflower oil.

Making a bad situation worse is the country’s ever-sinking currency, which has lost about a third of its value against the dollar over six years. Egypt’s efforts to protect the pound have always come up short, and another devaluation appears imminent, raising the cost of imported wheat once again.

With most Egyptians eligible for subsidized bread, no one is expecting a repeat of the food riots that handed Sadat a bloody street crisis 45 years ago.

But anger among the lower-middle class is rising along with food prices, boosting the potential for unrest in a country that has little fiscal leeway – it is using billions of dollars in IMF loans to shore up its economy – to extend food subsidies to hard-hit families.

“It’s the middle class in Egypt who are really suffering,” Mr. Kamel said. “The rich have no problem, and the poor have subsidies, so it’s the others who are in trouble. Even I can’t afford to buy chocolate any more for my kids.”