Egypt fixes prices for unsubsidized bread as inflation spikes amid war in Ukraine

Egypt’s government set fixed prices for unsubsidized bread late on Sunday night as part of an emergency response to a sharp spike in inflation in the wake of Russia’s invasion of Ukraine.

A prime ministerial decree issued late on Sunday night set price points for 45-gram, 65-gram and 90-gram loaves of all categories of bread — including baladi special and fino — as well as for a kilo of packaged bread. 

The move came after the price of unsubsidized bread increased by as much as 50 percent per loaf as wheat imports from both Russia and Ukraine were disrupted following Moscow’s military offensive.

Before Sunday night’s decision, bakeries were free to set their own prices for unsubsidized bread, Attia Hammad, the head of the bakeries division at the Cairo Chamber of Commerce, told Mada Masr earlier this month. 

While long-debated plans to cut back government support from subsidized bread and to scale back state intervention in the market were set to be enacted in June, Monday’s decision will see the government take a further step into the market for one of the country’s most vital food commodities. 

However, the effects of the move to set price controls for private bakeries, which buy flour at market prices, are not yet clear. Without support from the state, it could see bakeries operating at a loss. 

Sunday’s decree marks the first time the government has fixed the price of bread sold in private bakeries since the 1980s. According to the decision, bakeries must abide by the new set prices for a period of three months or until further notice. Those that violate the new regulatory framework will face fines between LE10,000 and LE5 million, based on an amendment to the competition law. 

Prices for baladi special bread, which uses a higher percentage of refined flour than the most common type of loaf, were set as follows: 

Prices for fino bread, the most refined type of white bread available, were set as follows: 

Two markets for bread operate within the country: a subsidized system that allows around 70 million people to buy five loaves per day at LE0.5 per loaf, and the other a free market. The government had planned to scale back the proportion of the market occupied by the subsidized system starting in June.

Since Russia’s invasion and the ensuing economic fallout, the government has sought to reassure the public, floating various policy directions for free-market bread in the press. After the government publicly mulled still more interventionist options, including a potential hedging program for unsubsidized bread, the president ordered the government to take action to regulate the market for unsubsidized bread last week.

Within the subsidy system, the Supply Ministry agency that procures wheat imports has also been hit hard by the impact of the Russian invasion on global wheat markets, with Finance Minister Mohamed Maiet saying that the wheat bill had climbed up LE15 billion, adding strain to an already considerable government budget deficit.

Parliamentarians have speculated to Mada Masr that a plan, in the works for over three years, to scale down the subsidy program that secures rates for the vast majority of the Egyptian public, will now likely be shelved for at least another year.