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Food prices causing world social unrest { March 2008 }

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Egypt's Rising Food Prices Swell Bread Lines, Deficit (Update1)
By Abeer Allam and Daniel Williams
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April 9 (Bloomberg) -- Atyat Musa Bakri, a Cairo mother of nine children, was waiting in line to buy subsidized bread for the third time in one day.

``The more cheap bread I can get, the better,'' she said as a crowd of about 30 women jostled at a bakery in the Boulaq district. ``The price of everything is going up and up, so I save on this. I spend all morning buying cheap bread.''

Bread is just about the only affordable food these days in Egypt, where rising commodity and energy prices have sent unsubsidized food prices up 20 percent or more in the past year. The rising cost of subsidies is damaging the government's efforts to reduce its budget deficit.

About 500 political activists and textile workers at the Mahallah El-Kobra factory in northern Egypt were arrested and dozens were injured in clashes with police on April 6 as the government clamped down on a one-day national strike to protest food inflation. In Mahallah itself, demonstrators threw stones at police phalanxes and set fire to trash.

The government-owned Egyptian Gazette newspaper said April 1 that seven people have died since the beginning of the year in brawls in bread lines.

``We have seen riots around the world and there's risk that these will spread because of rising prices in countries where 50-60 percent of incomes go to food,'' Jacques Diouf, the director general of the United Nations Food and Agriculture Organization, said in India today.

Social Unrest

Record high grain prices have led to strikes in Argentina, riots in Cameroon, Burkina Faso, Morocco and the Ivory Coast. The World Bank says 33 countries from Mexico to Yemen may face social unrest because of spiraling food and energy costs.

Egyptian inflation accelerated to 12.1 percent in February, the fastest pace in 11 months, the Cairo-based Central Agency for Public Mobilization and Statistics reported March 19. Food and beverage prices increased 16.8 percent, while non-subsidized bread and grain prices jumped 27 percent. Dairy products and eggs rose 20.1 percent.

The government of President Hosni Mubarak originally allocated about 10.8 billion pounds ($2 billion) to cover wheat imports this year. Now, Egypt will have to spend more than 16 billion pounds, close to 1 percent of gross domestic product, said Simon Kitchen, a senior economist at EFG-Hermes, a Cairo- based investment bank.

Deficit Pressure

He said bread and fuel subsidies have kept Egypt's budget deficit above 7 percent of GDP even as the government is trying to reduce it to 3 percent by 2010.

``Inflation makes reducing subsidies hard in political terms, but more necessary in financial terms,'' said Kitchen. ``They won't be able to reduce the fiscal deficit as quickly as they would like.''

Musa Bakri and her fellow shoppers live in a dusty neighborhood nicknamed ``China'' because it is so crowded. They stand in line for hours to purchase subsidized bread, which costs less than 20 cents for 20 round loaves, the maximum allowable purchase at one time. ``I keep coming back because bread at private stores costs two, three times as much,'' Musa Bakri said.

About 85 percent of Egypt's bread -- 230 million loaves a day -- is subsidized, said Himdan Taha, undersecretary of the Ministry of Social Solidarity.

``The bread crisis was aggravated because the non- subsidized bread kept getting smaller and more expensive, so many people just joined the bread lines, causing pressure on our system,'' Prime Minister Ahmed Nazif told reporters April 3.

Tax Collectors

Even before the April 6 protests, the Egyptian workforce was demanding relief. In December, tax collectors walked out and won increases in their minimum wage from about 300 pounds a month to 1,170 pounds. Doctors in state-run hospitals are threatening to strike if the government doesn't increase their minimum wage from about 342 pounds to 980 pounds.

Though strikes by public workers are illegal in Egypt, the government met the tax collectors' demands. The doctors may not get the same treatment. On March 6, Nazif said in a radio broadcast: ``Doctors in particular are prohibited from striking. Those who wish to express themselves have many alternative methods.''

Nazif floated a proposal last fall to replace subsidies on food and fuel with welfare payments to the poor, in effect giving them checks to buy what they need at whatever price they can find. He has yet to propose the plan to the parliament.

Last month, the Egyptian government waived duties on imported rice, dairy goods, food oils, steel and cement to fight inflation, the official MENA news agency reported.

At the bakery, Musa Bakri, 45, rattled off a series of price increases she says have hit the market in just the past few months: ``Meat that cost 8 pounds a kilo now cost 19 pounds. Chicken has doubled to 11 pounds a kilo.''

``How about eggs?'' asked a fellow shopper, Manil Ali Hassan, 35. ``They're twice as much.''

Last Updated: April 9, 2008 09:42 EDT

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