26 February 2015
* In response to the food crisis of 2007-08 the Egyptian government rapidly took steps to make sure bread continued to be available and made changes to trade policy in order to control its price.
* The government succeeded in lessening the impact of the food crisis on the poor, but this success came at a high fiscal cost.
The Egyptian food system has been affected by both global food markets and domestic factors. During the recent global food price crisis, an estimated 30-40 percent of the price fluctuations in the global food market were transmitted to Egypt's food market. Domestically, government subsidies for agricultural inputs and a wide array of food products have put downward pressure on the prices of food staples and sometimes caused supply bottlenecks and created black markets. The existence of these subsidies for many foods has pushed retailers and wholesalers into non subsidized food products such as fruits and vegetables. At the same time, fragmented markets, anticompetitive behaviour, and inefficiencies in the subsidy system have tended to put upward pressure on prices. These domestic factors contributed to the relatively low price transmission between the global and the domestic markets.
The importance of food policy
Declining real wages, increasing poverty, inefficiencies in the social safety net, and increasing media attention, placed pressure on the government to focus on food policy. Until early 2011 the governing regime was dominated by the president, backed by the National Democratic Party, implying little opportunity for other political parties to compete. Nonetheless, the increasing emergence of opposing parties and opinions represented a real threat. Other factors also forced the governing regime and the party to pay attention to food policy. In 2005 the process of choosing the president changed from national referendum to open elections, implying that there would be competition among political forces and hence a greater need to pay attention to social issues, especially given the ruling regime's desire for the president's son to succeed his father. In addition, the institutional setup governing domestic food trade was fragile. Until 2005, Egypt had no law prohibiting anti competitive behaviour, and even when the law was enforced in 2006, it remained largely ineffective. As a result, anti competitive behaviour prevailed.
Response to the food price crisis
The government's reactions to the...