Reassurances that the subsidies programme will stay and be given more funds was welcome news for consumers, writes Mona El-Fiqi Since President Hosni Mubarak instructed the opening session of the People's Assembly in October to restructure subsidies to ensure they reach the most needy, the issue has been making headlines. After weeks of controversy, Prime Minister Ahmed Nazif finally announced last week that the government is committed to continuing its subsidy programme since it is necessary for the poor, and an important tool to achieve social justice. Moreover, the government approved another LE1.4 billion in funds for ration cards, in addition to the current LE4.2 billion. Since concern was stirred about this essential financial assistance by the state, there have been two main streams of thought. The first proposes to reform the subsidi,,es programme which finances essential foodstuffs, bread and gas; the second suggested replacing subsidies with financial aide and leaving prices to market dynamics. The public generally preferred option one because they believe that no matter how much cash they are given by the state, it will never keep up with increasing prices. To end rumours and finalise the issue, Nazif held a meeting with representatives of the government, political parties and civil society on 6 January. Four hours later, the meeting concluded that the government will expand the ration card system to include more beneficiaries and pour more money into that programme. Currently, cards benefit 10 million families and allow them to buy staples such as sugar, rice, cooking oil and beans at reasonable subsidised prices. Minister of Social Solidarity Ali Moselhi explained that increasing the budget for ration cards will allow the addition of 15 million more recipients who were born between 1988 and 2008. The government had stopped adding new beneficiaries in 1988, but since 15 January more names are making the list. "The ration card system is considered a success since 85 per cent of subsidies in this scheme go to people who need them," Moselhi revealed. "This is a good percentage, so the government decided to increase the funds for ration cards and add new beneficiaries." To improve the efficiency of ration cards, the government will begin applying a system of "smart" cards to prevent the misuse of 15 per cent of ration card subsidies. The government's decision was welcomed by consumers who want to add children born in the last 20 years on their ration cards. Sayed Ahmed, an engineer and father of two, was glad that the subsidy programme will continue. Ahmed was also pleased that the addition of his two children will raise the household's monthly quota of staple foods. Another happy shopper is Soha Abdel-Ghaffar, housewife and mother of three: "The addition of my children to the ration card means increasing our budget because of the difference between market and subsidised prices for many food items such as cooking oil, sugar and rice." Abdel-Ghaffar added that although there were complaints in the past about the quality of the food on ration cards, this has improved markedly. Speaking at a seminar entitled 'The Administration of Subsidy Policies' last week, Moselhi explained that the government is very concerned about social justice and hence recently formed a ministerial committee for social development. Its members include the ministers of housing, health, investment, education, transportation, social solidarity and administrative development. At the seminar sponsored by the Association of Public Policy Analysis (APPA), Moselhi further explained that his ministry is responsible for the administration of direct subsidies, including cash money for citizens who have no income, providing basic needs at reasonable prices (ration cards), gas cylinders and bread. At the same time, the budget for subsidies is continuously rising, he noted. For example, last year, funds for gas cylinders rose from LE8.7 billion to LE9.8 billion, while subsidies for bread increased from LE9 billion to LE14.7 billion. Meanwhile, Moselhi continued, cash money subsidies proved to be unsuitable for everyone. For example, it is inconvenient for beneficiaries in Sinai to receive cash due to their remote place of residence. Other participants at the seminar agreed that while subsidies were necessary, the current 50- year-old system is outdated and needs to be reformed. Ain Shams University President Ahmed Zaki Badr argued that the government would not be able to achieve social justice unless it applies a package of comprehensive social policies which go hand-in-hand with the economic reform programme. Moreover, the government should guarantee fairness in the distribution of revenues from the economic development programme to improve the living standards of Egyptians. Samir Tobar, former chairman of the Economic Committee at the People's Assembly, agreed with Badr that the only way to achieve social justice is to increase production and apply fair methods in distributing resources. Tobar explained that the government should adopt some polices which increase production, hence raising the income of citizens and enabling them to cover their basic needs. This, however, will take years therefore the people should not rush the government, he added. At the same time, Tobar opposed giving the poor people cash money instead subsidies since this will not fulfil the gap between their income and their basic needs. "In the short run, subsidies should remain in place," suggested Tobar. "But in the long run, the government should prioritise achieving a balance between the income of citizens and price increases. Experts at the seminar noted that there should be a balance between supply and demand on the market, and this can only be achieved through increased production. According to a study conducted by APPA, the subsidy programme faces many challenges, including a heavy burden on the government's budget and structural defects in its application. Another defect is that at least 30 per cent of subsidies do not go to the most needy. The study added that continuous price hikes on food products, increasing poverty rates and low income levels of citizens make current subsidies insufficient. Hence, it recommended, budgeting for subsidies should be increased.
