Sources: Govt considers ending in-kind bread subsidy in coming fiscal year
The government is considering folding Egypt’s in-kind bread subsidy system — relied on by millions nationwide — into the broader cash support system, sources in the Federation of Egyptian Chambers of Commerce told Mada Masr.
The cash support system gives low-income households a fixed monthly sum to spend on a range of household goods, but leaves them more exposed to inflation when prices rise, an impact that has already sparked criticism that the move could amount to the state “abandoning” the country’s poorest.
The step, slated for the coming fiscal year, would complete the government’s years-long transition away from the direct in-kind subsidy system that has acted as a key part of its social safety net for lower income households for decades.
Under the proposal currently being discussed, instead of receiving a daily allocation of a specific number of loaves, social support beneficiaries would instead receive cash allocations via ration cards that they would then use to purchase goods, including bread, at normal market prices, according to the sources.
The state has slowly moved away from the bread subsidy system over the past ten years of International Monetary Fund-guided policy adjustments.
Prime Minister Mostafa Madbuly teased the move at last week’s Cabinet meeting, saying that the government was looking at shifting its in-kind food subsidy system to a direct cash-support model during fiscal year 2026/27.
Shortly afterward, Supply and Internal Trade Minister Sherif Farouk framed the shift as improving households’ consumer choice, saying it would give beneficiaries “the freedom to choose the goods that meet their actual needs, in line with the value of the subsidy allocated to them on their ration card, without being restricted to specific items,” while “providing citizens with broader options across different goods and products through multiple outlets.”
Neither official detailed what the policy shift would entail exactly. But a senior source in the Foodstuff Division of the Federation of Egypt Chambers of Commerce told Mada Masr that their division had been informed by the Supply Ministry in recent weeks that the state is considering expanding the range of goods available through ration cards to include bread.
Ration cards were introduced in 2013 and the move toward using them for cash support started the following year. The cards entitle qualifying households to purchase a selection of basic household foods and goods to the value of LE50 per individual for a maximum of four individuals per each ration card. For a fifth individual, the amount drops to LE25.
The cards can be used for specific goods, including lentils, ghee and cleaning products, at prices fixed by the Supply Ministry and at ministry-run outlets across the country.
Other goods to be added to the ration card may include products that are not currently offered by the Supply Ministry, such as chicken, the senior source said.
They added that instead of the ministry fixing prices for the goods, they would be available via the card under the proposal at normal market prices.
Subsidized bread would also be incorporated into the same card at market price — currently at around LE2 for a 90 gram loaf — instead of at its subsidized price.
“Bread would no longer be priced at [the subsidized rate of] LE0.20 per loaf, but at its full production cost, and the same would apply to other rationed goods, which would be sold without discounts from market prices,” the source said.
Under this proposal, beneficiaries would have to split the total value loaded onto their ration cards across varied food commodities, including bread.
When contacted by Mada Masr for details on the government’s plans for the shift, Farouk’s media office said the proposals were “still under review with other relevant state bodies,” declining to provide further information.
But the implications of the move toward a more expansive cash support system have already sparked concern about the impact on low-income households.
MP Mohamed Fouad criticized the unannounced plan during an appearance on Amr Adib’s Al-Hekayah show on Friday, arguing that it will leave the poorest in the country extremely vulnerable to inflation.
“What happens,” asked the MP, “when tomorrow morning we wake up and the card has LE1 for you to buy one loaf of bread priced at LE1 — what if the cost rises to LE1.5? Will you have to buy fewer loaves?”
“If you get a fixed LE200, LE300 or LE 400, without [factoring in increases to account for inflation], then we are not simply moving from in-kind to cash support, we are starting to abandon people,” said Fouad.
The supply minister presented a similar proposal to the division around a year ago, merging bread subsidies into unified cards with other subsidized commodities, according to a senior source in the Bakery Owners Division. The system was to see beneficiaries split the value of their subsidies between bread and other food items.
Bread, as a national staple, has been heavily subsidized for decades from wheat-milling through to baking under a system managed by the Supply Ministry.
The system has remained in place in recent years, even after the broader food subsidy system moved toward cash allocations loaded onto cards in 2014. But the government took initial steps in the same year to roll back the special subsidy for bread, introducing a “point” system.
This allowed citizens to trade-in the number of loaves they are entitled to daily for “points” on the ration cards worth LE0.1 per loaf. These could then be used to purchase other goods available on the ration card, and were not redeemable for cash.
But for the decade this system has been in place, the government has not raised the value of bread points.
The Bakery Owners Division source framed the latest move as a government effort to cut its expenditure on subsidizing bread. “The state appears to have realized that the current system — allowing beneficiaries to forgo subsidized bread in exchange for bread points worth LE0.1 per loaf, which are then added to ration cards as credit toward other subsidized commodities — is no longer effective in reducing subsidized bread consumption, especially as free-market bread prices have risen outside the subsidy system, making bread points an unsuitable alternative for households given their declining value,” they said.
In fact, more people redeemed their state-subsidized bread allocation this year than previously. The redemption rate rose to around 83.6 percent in FY2025/26, leaving only 16.4 percent exchanged for bread points, compared to 79.5 percent and 20.5 percent respectively in the previous fiscal year.
“The state actually prefers beneficiaries to give up bread in favor of other subsidized commodities because bread subsidies are more costly to the budget than food subsidies,” the source said. “The system proposed to us — and we don’t know whether it will be implemented — would help achieve that goal.”
Bread subsidies cost the government around LE116 billion in the current fiscal year budget, compared with the LE35.62 billion allocated for other goods subsidies.
A senior official on the board of the Federation of Egyptian Chambers of Commerce told Mada Masr on condition of anonymity that the proposal described is largely congruent with the findings of several studies presented to the government by various bodies, including the federation itself, on the future of Egypt’s subsidy system.
The studies broadly concluded that the goods subsidy system should be expanded to cover a wider range of food products to be sold through various shops and major retail chains, rather than at subsidy outlets alone, with the fixed sum allocated to cover goods at their full market prices rather than at discounted rates, according to the source.
The source pointed to the government’s Carry On project to upgrade consumer retail complexes as something that could contribute to a fully cash-based social support system.
“Carry On, in this form, could become part of the large open market available to beneficiaries of subsidized goods, especially if the state succeeds in integrating subsidy retailers into the project to upgrade their stores in a way that allows them to compete under a franchise system,” the source said.
Last year, the government launched the Carry On project to revamp the Supply Ministry’s consumer complexes through a new commercial brand, offering a broader range of food products than normally available at the ministry’s stores, an initiative the source described as a way to better utilize state-owned assets while generating profits through faster capital turnover.
The source added, however, that the state has yet to present the federation with its final position on the shift to cash subsidies.
Prior to 2014, Egypt’s subsidy system was entirely in-kind, like the bread system. In line with the recommendations of international lending organizations, such as the International Monetary Fund, the government shifted in 2014 to a cash support system based on food stamps and ration cards.
Over the following years, the government gradually increased the per capita food subsidy allowance from LE15 to LE21, before raising it to LE50 in 2017, where it has remained unchanged ever since.
The stagnation in the value of food subsidies per person, amid rising prices for subsidized goods available through ration cards, has eroded the real value of the subsidy. This is illustrated in the following figure, which compares the quantities of various goods that subsidy allocations could purchase between July 2017 and May 2026, assuming the entire subsidy amount was spent on a single item.
Subsidy value erosion as allocation buys fewer goods due to inflation – Courtesy: Published data on subsidized goods prices from July 2017 and May 2026, and Mada Masr calculations
The state maintained the bread subsidy, however, introducing instead phased limits on state expenditure on the subsidy. This began with a cap of five loaves per person per day.
The weight of a subsidized loaf has also been reduced since 2014 from 130 grams to 90 grams. In June 2024, the government raised the price of subsidized bread from LE0.05 to LE0.2 per loaf, while the cost of subsidizing a loaf rose from LE0.3 to LE1.32, according to government statements issued last month.
In recent years, the government has also set income and asset-based criteria to “target” subsidy allocation to “the most deserving,” expelling millions of households from the program.
The following figure illustrates the decline in the number of households benefiting from the subsidy program.
Decline in subsidy beneficiaries – Courtesy: State budget financial statements
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المصدر: Mada Masr