* "Points system" encourages citizens to buy only what they
* Reforms will allow citizens to purchase wider range of
* Changes linked to smart card programme for bread
* Corruption plagues decades-old subsidies system
By Maggie Fick
CAIRO, June 25 Egypt is expanding its use of
modern technology to tackle decades-old problems of corruption
and waste in its costly food subsidies system as the government
pursues reforms to ease the strain on state finances.
Supplies Minister Khaled Hanafi said some 25 million
Egyptian families who already have electronic smart cards for
bread purchases will be able to use them to buy 20 different
subsidised goods at grocery stores across the country from July.
The new system aims to raise incentives for Egyptians to buy
only as much subsidised bread as they need, helping reduce
spending on wheat, of which Egypt is the world's top importer.
Subsidies of bread and energy products have traditionally
eaten up around a quarter of Egypt's budget, which is forecast
to end the current fiscal year on June 30 in deficit to the tune
of 12 percent of economic output.
Officials say wheat consumption is kept artificially high in
part by citizens who purchase subsidised loaves for the
equivalent of one U.S. cent and feed them to their livestock
because the bread is cheaper than animal feed.
"A motivation was needed (to bring down consumption), so we
came up with a system to give citizens points for the bread that
they do not use," Hanafi told a meeting of local businessmen in
Cairo on Tuesday night.
Under the reformed bread programme being rolled out since
April, a "points system" allows citizens who consume less than
the quota to spend their savings on other foodstuffs.
Under the current system, they only have the option of
buying infamously poor quality rice, sugar, and oil but Hanafi
said the list of items available to purchase would be expanded
first to 20 and then to 100 within months. Meat and poultry will
be among the new products on the initial list.
He said smart card holders will accrue points if they
purchase less than the quota of five loaves per family member
per day, a number that officials hope can later be reduced.
The points can then be used to purchase foodstuffs to be
made available at 25,000 privately-owned grocery stores around
the country partnering with the government for the programme.
Hanafi, who retained his position after Egypt's new
president Abdel Fattah al-Sisi took office earlier this month,
has been outspoken about the need to reform wasteful subsidies.
Sisi spoke cautiously on the topic during his campaign,
saying it could only happen gradually, but has urged Egyptians
to prepare to make sacrifices, apparently laying the ground for
a period of painful economic austerity.
Three years of turmoil in which protests have helped lead to
the removal of two presidents and hundreds have been killed in
the streets have wrecked Egypt's economy and left it largely
dependent on aid from wealthy Gulf Arab allies.
"HUGE LEAKING HOLES"
Egypt spends more than $4 billion a year on food subsidies
on which millions of poverty-stricken Egyptians depend. One
cash-strapped government after another has resisted tackling
problems in the system, fearful of a backlash from the public.
Officials increasingly acknowledge that a system intended to
help the poor now allows profiteers to reap the benefits of
corruption and mismanagement in the winding supply chain.
"A lot of money is pumped in by the state and the recipients
are on the far other end, there are huge leaking holes and in
the end the recipient doesn't get anything," said Hanafi.
The new system will also enable the government "to avoid a
lot of corruption" because grocery stores will have to order
goods requested by their customers from the government instead
of the government delivering goods without any consumption data.
The new smart card system for bread distribution launched in
April and now operational in several provinces already collects
such data, and targets parts of the supply chain where waste and
corruption has become ingrained.
Hanafi said last month that the reformed system had so far
reduced bread consumption by 30 percent in the Suez Canal city
of Port Said where the rollout began.
($1 = 7.1501 Egyptian Pounds)
(Editing by Catherine Evans)