Menna Hemdan

900113240
ECON 4051
Dr. Hala El Hadidi
Bread Subsidies in Egypt
In this article, the authors discuss the importance of whether to maintain or
eliminate bread subsidies. The article begins with an example from the Epic of
Gilgamesh. The example involves Enkidu who was a barbarian and who depended
on wild animals for sustenance. However, he had access to sustenance, nourishment
and civilization when offered bread. Basically, this example delivers that bread could
transform a barbarous person into a civilized one. The difference in the price of
subsidized bread and unsubsidized bread could lead to a division between Egypt and
the West in terms of politics, economy, and culture. Thus, determining whether to
eliminate subsidies or keep them is the key to economic permanence. The failure of
Egypt to remove the subsidies -in other words: keeping the subsidies-, could estrange
financial benefactors. However, the removal of subsidies could lead to economic
instability. Because bread is essential in ones life, the subsidy system was considered
as a system that brings about equality and stability. However, during Mubaraks
regime, the system was being transformed into a system that puts future growth into
risk because of the interest of short-run social and political gains. This basically
means that people dont realize the effect of subsidies on the long run. For the earlier
numerous years, international organization had seen subsidies as a financial drain and
a barrier to industrial development; so, they have been pressuring Egypt to remove
them.

Nevertheless, they didnt take into account the human cost associated with
eliminating subsidies. Most of Egypts population wont be able to afford to buy
bread if subsidies are removed. This put Mubarak in a difficult position at the time
because he wanted to remove subsidies and at the same time nurture Egypts
population. This was impossible, because how would he sustain the population when
most of them cant afford buying unsubsidized bread? As the authors go further in the
article, they will discuss the history of subsidies, debt, and violence in Egypt.

Concluding the article, the authors quoted the views of several people
regarding the removal of subsidies. Mohamed Abu-Zaid referred to bread as a delicate
matter in Egypt. He further talks a little bit about his life and his salary. He earns a
monthly salary of L.E 200 and as a result buys subsidized bread with L.E 2 everyday.
Another example is of a 65 year old Ahmed Abu-Kharoob who only receives a
pension of L.E 450 for a living. He is also responsible for his sick wife and his
grandsons. Abu-Kharoob stated that the only time he can buy bread is from 6:00 to
8:00 a.m. Otherwise, he wouldnt be able to buy bread. The last example is about
Amina Ahmed Zaqzouq who receives her late husbands monthly pension of L.E 350.
She simply explained that her family relies mainly on bread and that without the
bread there would be no life. Eliminating subsidies is clearly not an option for all of
the examples mentioned above because if they cant afford buying unsubsidized
bread, they wont be able to live. Two examples of countries that had a bit of a similar
situation as Egypt is Pakistan or Sri Lanka. The history of these countries also shows
that violence came with subsidy elimination.

In 1997, food riots in Pakistan had occurred because of the new policies that took
place, which indicated a reduction of food prices and a parallel decline in the incomes
of the poor for the sake of structural adjustment throughout the late 1980s and early
1990s. Moreover, the Sri Lankan experience with eliminating subsidies is closely
similar to that of Egypt. In 1953, the Sri Lankan government removed the subsidies
off of rice. This resulted in the increase in the price of rice by 280%. Riots resulted in
the resignation of the prime minister and victory for the people in favor of keeping the
subsidies. There are several ways to avoid violence as stated by the United National
Party and these are: moderation, warning of future prices increases, and giving people
an idea of what will happen rather than just taking decisions immediately.