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Bread Shortages Fuel Discontent

November 02, 2003|Mohamed Khalifa | Associated Press Writer

CAIRO, Egypt — The line was long, the weather was hot and tempers were flaring. All the people wanted was their daily bread, but the bakery was running short and had to ration supplies.

"I've been waiting in line for an hour," shouted Amina Ismail, 34. "And when I finally get to the front of the line, he won't allow me to buy all the bread I want."

In poverty-stricken Egypt, where shortages and price hikes have triggered bloody riots, scenes like the one at the el-Mahaba Bakery in Cairo are warning signs. Egypt is by far the largest Arab country. It is a vital U.S. ally and a critical player in Arab-Israeli peace efforts. Its stability depends on its capacity to feed all 70 million of its people.

Critics say the lines for bread are testimony to Egypt's failure to shed old socialist economics and adopt a free market.

The government buys more than 60% of Egypt's wheat needs on foreign markets. It acknowledges it is short of hard currency to pay for the imports and to maintain the subsidies that keep the price of "baladi," the most humble loaf, at 5 piasters (under one cent) in the poorer areas.

The shortages of recent months may not last. Government officials have promised to increase the subsidies, and Finance Minister Medhat Hassanein told Associated Press last month that the government would import more wheat.

Ahmed El-Naggar, an economist at Cairo's Al Ahram Center for Political and Strategic Studies, doesn't expect a repeat of the 1977 riots that forced the government to abandon price hikes on basic goods. But he says nothing is certain.

The government has blamed the crisis on sharp rises in world commodity prices. El-Naggar attributes it to a 25% fall in the value of the Egyptian currency since it was floated in January as part of the reform effort. A weaker Egyptian pound makes imports more expensive.

El-Naggar supports the reforms but says the weakened currency will exacerbate a trade deficit he estimates is already as high as $12 billion. Meanwhile, "the tax collection system is failing and there are absolutely no plans to support an export-driven economy," he said.

The government has repeatedly promised reform of outdated investment policies.

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