* Smart card system rationing bread to be tried out
* Trial to be held in turbulent Port Said
* Rulers had avoided bread rationing due to unrest risk
* Bakers protest and threaten to strike
By Tom Perry and Asma Alsharif
CAIRO, March 19 Egypt plans to start rationing
subsidised bread, a minister said on Tuesday, taking a risky
step to curb the budget deficit by restricting supplies of cheap
loaves vital to the poor.
The government will start rationing "after two months,"
Supply Minister Bassem Ouda said. Trials of a rationing system
using electronic smart cards will begin in the restive Suez
Canal city of Port Said and its suburb Port Fouad.
Food supply has long been an explosive issue in Egypt, which
is struggling to secure an IMF loan as parliamentary elections
approach. Rising prices are being passed on to hard-pressed
consumers and shortages have already provoked discontent.
The change means anyone wishing to buy subsidised loaves
will need a ration card - to which all Egyptians are entitled
but which the better-off have usually let lapse. Ouda did not
say how many loaves citizens would be entitled to.
"Every ruler of Egypt has resisted cutting these subsidies
because of fears of social unrest," said Elijah Zarwan, a
"It's clear that the subsidy system is sick, the economy is
sick. But the cure in this case may be as painful as the
Curbs on bread subsidies provoked riots in 1977 and
Egyptians are now angry about falling living standards as the
economy heads into crisis under a new, Islamist leadership since
the overthrow of president Hosni Mubarak two years ago.
The cheapest subsidised loaves are sold for 5 piastres, or
less than 1 U.S. cent. As recently as 2008, Mubarak faced
protests over bread shortages.
Though Egyptians are technically each entitled to three
subsidised loaves a day, according a report by the government
and the World Food Programme last year, there are in practice no
curbs on how much of the cheap bread people can buy.
Cutting subsidies is seen as vital for Egypt to secure the
$4.8 billion loan it is seeking from the International Monetary
Fund, which held talks with the government this week.
Tempers are already rising over higher prices. Bakers are
threatening to strike, accusing the government of owing them 400
million pounds ($59 million) in overdue subsidies. Ouda said on
Monday that the bakers would face legal action unless they
called off the strike action.
Abdullah Ghorab, head of the bakers' association which
represents 25,000 private bakeries across the country, said on
Tuesday that imminent strike action had been postponed as they
seek a meeting with the prime minister in two days' time.
Around 200 bakers protested outside the Supply Ministry on
Tuesday, saying that the government wanted them to sign a
contract that would set the price for subsidized flour at a
level they found too high.
"If they don't change this, we will close our shops," bakery
owner Mohamad Sharaf said. "We will not be able to work because
we will not pay out of our own pockets."
The bakers, who had travelled to Cairo from around Egypt,
also complained of corruption in the bread sector. Rising fuel
and ingredient costs have hit their businesses hard, bakers say.
The government spends over $5.5 billion a year on food
subsidies, which also cover items such as rice, oil and sugar. A
slide in the Egyptian pound's value is pushing up the bill, as
much food has to be bought for dollars on international markets.
Analysts say there is a large amount of waste in Egypt's
bread programme and some farmers give subsidised loaves to their
livestock as they are cheaper than animal feed.
Wheat imports are down sharply this year as the economic
crisis makes it harder for Egypt to arrange payments; between
Jan. 1 and Feb. 20, it bought around 235,000 tonnes, roughly a
third of what it purchased in the same period a year ago.
Supply minister Ouda told the state news agency MENA that
subsidised bread and cooking gas would be added to the list of
staples made available to Egyptians below market prices under a
state rationing system.
The government has already said it would use a new smart
card system to ration motor fuel from July and has been talking
about rationing cooking gas since late last year.
The cities earmarked for the bread rationing trial, Port
Said and Port Fouad at the Mediterranean mouth of the Suez
Canal, have seen violent protests in recent weeks over death
sentences handed down on local soccer fans for their role in a
stadium riot last year when more than 70 people died.
With the economy weakened by two years of political turmoil,
Egypt is under pressure to curb a subsidy bill that accounts for
about a quarter of state spending - although the bulk of this is
for fuel rather than food.
"Cooking gas and bread will start to be distributed using
smart cards after two months," Ouda said, adding that this would
follow a tender process to pick a smart card supplier.
Cairo analyst Zarwan said he expected the government to make
sure the smart card system was working properly before trying to
"The number of people who depend on subsidised bread is
enormous," he said. "If the people who depend on it are no
longer able to get it, the response would be terrifying to