Hausse des prix, crise du secteur agricole… les défis du gouvernement égyptien

As the world's largest wheat importer and dependent on Russia and Ukraine for supplies, Egypt has had to stem the intermittent rise in raw material and input prices in recent months. This situation has prompted the government to seek new ways to protect the most vulnerable and transform its agricultural sector. Racha Ramadan, professor of economics at the Faculty of Economics and Political Science (FEPS) in Cairo, Egypt, gives us her perspective on the situation in the country and the reasons to hope for better days.

FARM Foundation: What are the impacts on Egyptian food security and agricultural production of the increase in raw materials and inputs?

Racha Ramadan: The general annual inflation rate is now more than 40 % – including 18 % for fruits and vegetables) according to the Central Bank of Egypt. Egyptian households, especially the poorest, are therefore particularly vulnerable to this price increase. According to theIFPRI, households have had to reduce their consumption of certain basic products and foods, particularly proteins such as meat and chicken.

The problems, however, are not new. The country is going through a series of political, health and economic crises that are slowing down the achievement of Sustainable Development Goals (SDGs). With every crisis, the progress made on poverty or food insecurity, albeit tentative, through economic reforms, is swept away. For example, before the COVID-19 pandemic, the poverty rate had fallen for the first time in 20 years. According to CAPMAS, it had gone from 32.5% in 2017/2018 to 29.7% in 2018/2019.

Agriculture has been one of the most resilient sectors during the pandemic. But it is difficult to measure the impact of rising prices on producers today. Net producers, those who produce more than they consume, were able to benefit from the price increase at least in the short term before input costs increased. However, for farm households that self-consume and buy their own food, the difficulties have been very significant.

According to theIFPRI, the agri-food system will be the most affected by the increase in global prices, with a reduction in GDP of 0.7%.

FF: How did the government respond to these crises? What public policies were implemented to mitigate the shocks on households?

RR: The government has implemented measures to support the most vulnerable against income loss and inflation. For example, it has increased the number of beneficiaries of certain social programs. For example, more than 400,000 additional individuals have benefited from cash transfers. Takaful And Karama (editor’s note: solidarity and dignity in French, see below) While the government has helped informal and seasonal workers by providing them with transfers of 500 Egyptian pounds (about €15) for three months. This is in addition to existing subsidies for energy and basic food products. These expenditures are necessary to cushion the shocks, but the burden on public spending is very heavy, especially with the rising prices of agricultural and energy commodities.

FOCUS – Russia & Ukraine: Strategic Wheat Exporters for Egypt and North Africa

FF: Especially since Egyptians are big consumers of bread, a product that is rightly subsidized...

RR: Indeed, bread subsidies are a key component of this public support. However, the wheat consumed and used to produce bread cakes is imported, largely from Russia. It is impossible for the country to stop these imports, even if prices soar. Moreover, subsidized bread has not been accessible to all households since 2014, as reforms have been implemented to better target access.

Today, you need a special card to buy these 5 piastre pancakes (editor's note: 0.25 euros) and the quantity is limited to 5 pancakes per person per day. If households consume less than their quota, they accumulate points which are added to a ration card allowing them to purchase other subsidized products.

Around thirty-five products are covered by this card, which is owned by more than 701,000 Egyptian households. These cards—distributed based on household income—are loaded with an amount that households can use to purchase food at lower than market prices in specific supermarkets. The government is also trying to improve the targeting of this program, which is very costly for public finances.

FF: Has the government implemented other programs to address economic shocks on households, particularly in rural areas?

RR: Other innovative programs are being tested to increase the effectiveness of social protection policies. I am thinking in particular of a cash transfer called Takaful And Karama. Launched in 2015, it targets women and is conditional on the children in the household actually attending school (80 % of the year) and on these women attending nutrition and health classes (World Bank ).

Targeting women, particularly in rural areas, has proven beneficial in combating malnutrition and school dropouts. As an economist, I can only recommend having multiple programs tailored to poverty reduction objectives. The latter is complex and deserves a multidimensional approach, particularly in rural areas and the agricultural sector.

FF: Exactly, how do these programs target rural areas?

RR: The agricultural sector and rural areas have generally been neglected by the powers that be for several decades. Much effort has been concentrated in cities and certain types of agriculture, to the detriment of farmers. Yet this is a strategic sector for the country and its food security. The primary sector employs 1 in 5 people and contributes more than 10% to GDP. But many producers are in very difficult economic situations and vulnerable to shocks.

Agriculture is an informal sector where poverty is much higher than in the rest of society. According to the Sustainable Development Financing Report in Egypt (2022), 67% of poor people live in rural areas. It is therefore particularly important to provide these producers with economic opportunities and invest in rural areas to avoid increasing urban exodus. The government launched a program in 2019 called " Hayah Karima » (editor’s note: dignified life in French) aimed at rural areas with investments in infrastructure, education, health and the economy. The program is a component of the government's strategic plan "Vision 2030" for achieving the Sustainable Development Goals.

Moreover, during COP 27 in Sharm el-Sheikh, the Egyptian presidency announced the launch of a plan inspired by what was done in Egypt but for the African continent, “Decent Life for Climate Resilient Africa Initiative”The aim is to encourage private investment in rural areas to increase productivity and prosperity.

FF: Egyptian agricultural policy has long favored the export of food products, often minimally processed. Is this strategy changing?

 RR: Egypt has indeed adopted a new agricultural strategy aimed at all farmers to integrate them into sectors and production chains. Added value must be created in rural areas, and this requires product processing. I believe that the vision of the agricultural sector is changing.. It is no longer a question of exporting unprocessed products but rather of developing downstream activities. However, Egypt will not abandon exports because they are an important source of income. Exports from the agri-food sector represent 13% of non-oil exports. We must continue to take advantage of products in which the country has a comparative advantage.

At the same time, the government wants to increase self-sufficiency in certain productions to reduce its dependence on external sources, by increasing agricultural production of strategic products and modernizing storage facilities to reduce waste. This requires taking into account water use, Egypt's often extreme temperatures, and the impacts of climate change, given that land is scarce and that it will be necessary to move away from the Nile and into the desert.

Egypt's 2030 strategy focuses on consolidating agriculture that has a positive impact on the environment, particularly by trying to reduce water consumption in the primary sector. Agriculture consumes 80 billion tonnes of the country's water, most of which comes from the Nile. Therefore, by deciding to develop new land far from the Nile, it will also be necessary to devise much more water-efficient systems and cereals that are more resistant to drought. This requires public investment and choices in terms of research and support. IFPRI also recalled in a recent report that it was better to prioritize public money towards research on seeds that resist drought rather than on more economical irrigation systems.