Egypt says subsidy spending secure, to target needy

CAIRO Fri Oct 22, 2010 11:57am EDT

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CAIRO Oct 22 (Reuters) - The finance minister sought on Friday to reassure Egyptians faced with soaring food prices that the government was not trying to cut subsidy spending although he said Egypt did want to direct it at the most needy.

Subsidies are a sensitive issue at any time in Egypt where many rely on subsidised bread and other basics. The issue is more acute now with urban inflation at 11 percent, food price rises double that and a Nov. 28 parliamentary election looming.

Surging food prices and subsidised bread shortages led to violent protests in 2008. So when global wheat prices climbed this year, ministers in the world's biggest wheat importer were swift to tell Egyptians that stocks were secure and plentiful.

"There is no intention to decrease the subsidy for basic provisions and petroleum products," a statement citing Finance Minister Youssef Boutros-Ghali said.

The government has previously said it expected to spend about 101 billion Egyptian pounds on subsidies, about a quarter of its 2010/11 budget. [ID:nLDE65R1O7]

"The general aim is to increase the subsidy (bill) if the need calls for that," he said, such as in cases like 2008 when global prices rose. He added that subsidies would reach "the really deserving" with a new smart card system.

Under the scheme, holders can buy basic goods each month at low costs, such as rice, sugar, tea and cooking oil. From January, canisters of butane cooking gas will be issued based on a coupon system, the minister's statement said. "The government will not impose on low earners any increase in the prices of these goods or reduce amounts with the supply cards," he said, adding he was working with the Social Solidarity Ministry to ensure subsidies did not go to those who were not in need. (Writing by Edmund Blair; Editing by Mark Heinrich)

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