MINISTER of Supply and Internal Trade Ali Moselhi this week reiterated the government's commitment to social protection for those most in need through the subsidies system, but said that these needed to be better targeted. Speaking at the Egyptian Centre for Economic Studies (ECES), Moselhi described the present subsidies system, saying it was partly cash transfer and partly in-kind. There were also direct and indirect subsidies, he said. Cash subsidies were used to subsidise state pension funds, as the existing social insurance and pension system was not funding itself, especially in the light of increases announced by the government. In-kind subsidies include the former commodity subsidy system, in which certain products were sold at fixed prices to consumers, as well as the bread subsidy system. The in-kind commodity system has now changed into a cash subsidy system in which individuals are given a certain sum to buy products at market price, but the bread subsidy system remains in-kind. A loaf of bread is sold at LE0.05 regardless of the cost of production, whereas at market rates the same loaf has cost LE0.3, increasing to LE0.39 last year. This year the cost stands at LE0.53 and with increases in fuel and electricity prices it could go up to LE0.6, the minister said. The government also provides indirect subsidies, for example by subsidising the fuel used for the production of electricity. “I am all for the subsidies system, as it is one of the main means adopted by the government to ensure social protection,” the minister said. However, having more than one price for the same product created distortions, he added, saying that while “social protection is important, so is ensuring the competitiveness of markets.” The bread subsidy system also needed reform, he said. “There must be a way out of the bread subsidy system, but not this year,” he said. Some 81 million people currently benefit from the bread subsidy system. The government was planning overall reform of the subsidy system to make sure that subsidies go to those who need them most, he said. However, a thorough study was needed first to indicate the needs of various sections of the population. This could be done after the results of the 2017 census come out in August. “The subsidy system needs major change, but not without studying the needs of the various sections of society,” the minister said. When reforming the system, the government must ensure that the prices paid by consumers reflect efficient production methods, Abla Abdel-Latif, director of the ECES, said. She also stressed the need for the government to stick to its announcements, saying that it had earlier announced a schedule for phasing out electricity subsidies, causing industry to make its calculations accordingly, but that it had then announced different and much higher rates last week. Increases to cash subsidy rates paid to individuals through the ration-card system had not achieved the targeted improvements in living standards, Abdel-Latif said, because prices had increased. Cash transfers to ration-card holders more than doubled recently, going from LE21 to LE50 per person.
