Subsidy reforms mix uneasily with Egyptian electoral politics

Reform of subsidised food distribution by a new Brotherhood minister has worried some critics, who worry that the Brotherhood is using the measures to shore up votes

Minister for Internal Trade and Supply Bassem Ouda has quickly become a poster boy for the Muslim Brotherhood, of which he is a member, for his new campaign to reform subsidised food and bread distribution.
According to the Muslim Brotherhood's official newspaper, Freedom and Justice, "since he stepped in the ministry and he has set providing basic commodities to every citizen with high quality … as his target, and he announced clearly and firmly that he will fight the black market with all his might."
Ouda, who was appointed in January, has modified the bread subsidy system and is leading plans to enhance the quality of subsidised products, as well as to update recipients' databases. His efforts have helped reduce bread queues and control smuggling of subsidised flour, amid deteriorating economic conditions sparked by the political instability, experts say.
While the attempts to reform Egypt's antiquated subsidy bureaucracy have been welcomed by many, some observers have drawn links between Ouda's reforms and the Brotherhood's political aims.
"There is a populist side," said Hania Sholkamy, an anthropologist at the American University in Cairo specialising in subsidy reform and poverty reduction. "We are approaching elections. You need to give people something."
The new products, including a higher value sunflower oil replacing soybean oil, and a higher quality sugar, are branded "rights returned to the people" and the campaign has the slogan "the best product for the best people," which Sholkamy describes as "electoral slogans."
After almost a year in office, Mohamed Morsi and his government could use a boost in popularity. An April poll by the Egyptian Centre for Public Opinion Research (Baseera) showed that Morsi's favourable poll ratings is at 46 percent, down from 78 percent in the first 100 days of his term.
Critics see the fanfare accompanying the supply ministry's new efforts as part of an attempt to shore up this fading popularity.
"We want to enhance the service in quantity and quality so that it reaches those who deserve it, because the people of this countrydeservethis," Nasser El-Farash, spokesperson of the supply ministry told Ahram Online.
Activists on Facebook shared pictures of bread distribution cards with the logo of the Freedom and Justice Party and Ouda's name on them, highlighting fears the party would use the ministry for its political interests.
The ministry denied the claim, and asked those who witness such violations to report them.
However, Amir Bassem, a member of the FJP's higher committee, says that although there is no central policy for the party in this regard, the party's units can launch such initiatives individually in coordination with bakeries, employing local youth.
He called on civil society to participate in similar campaigns.
More than 68 million Egyptians receive monthly food rations, which include subsidised cooking oil, sugar and rice. Subsidies consume a big chunk of the country's budget.
With rising inflation rates and a tumbling currency, the government needs to control a widening budget deficit expected to reach 11.5 percent in 2012/2013 by implementing subsidy reforms, giving up some of energy subsidies, and other unpopular measures needed to secure foreign funding.
While such measures would deal a serious blow to millions of Egyptians struggling to make ends meet, economists say they are inescapable.
"The Egyptian economy is eroding; the current subsidies pattern can't continue or else the government will have to inject money and prices will climb," said former finance minister Hazem El-Beblawi.
Food ration subsidies in the 2013/14 draft budget will cost LE 30.8 billion, 15.9 percent higher than the current year's budget. This increase, however, could be offset by other plans to cut spending on fuel subsidies and raise prices of other goods.
Last week, the Shura Council, which holds temporary legislative powers, approved amendments to the income tax law so that more taxpayers are included in the top band of tax, a rate of 25 percent.
"Everyone will have to bear the repercussions but the richer should bear more than the poor…subsidies should reach those who deserve it," El-Beblawi said.
An up-to-date database of subsidised food recipients, excluding obsolete and inaccurate information and checking the financial background of recipients is an important step in this direction, experts say.
Some of the 18.6 million accounts of those eligible to receive the rations reportedly belong to people who have since died, or are outright fake accounts.
However, Sholkamy says the current reforms have been in the pipeline since 2009 and that the Brotherhood needs to develop a clearer vision that enjoys more public consensus and is discussed with transparency.
"In the bigger scheme, we need to ask questions about the subsidised products, if they are what people need and their nutritional value," Sholkamy said.
"There should be discussions with social and political powers on the longterm vision as well as continuous experimentation with policies evaluating and producing information all the time," she added.
FJP officials say the current policies are on the side of the people.
"The leftist former minister Gouda Abdel-Khalek held the position but did nothing," said the FJP's Amir Bassem.
"People weren't able to find bread before; now it is available."
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