The Economist March 12th 2022 39
Middle East & AfricaTheripplesofPutin’swarBread and oil
T
he lasttime Egypt raised bread prices,
the Soviet Union was still intact. Since
1989 subsidised bakeries have offered 20
loaves of aish baladi, a glutinous pita that is
a staple, for one Egyptian pound. Back then
that sum was worth almost $1. Today it is
worth about six cents, less than a tenth of
what it costs to produce the bread.
The state spends 45bn pounds ($2.9bn)
a year to make up the difference, more than
half its total foodsubsidy bill. No govern
ment has dared tinker with this costly ar
rangement. Bread is the main source of cal
ories for millions of Arabs, and thus an ex
plosive political issue.
Vladimir Putin’s invasion of Ukraine,
which has sent commodity prices surging,
will cause widespread hardship. Pricey
wheat will blow up budgets in the Middle
East, perhaps forcing subsidy cuts that
leave citizens hungry. In subSaharan Afri
ca, higher oil prices will strain economies
that are already creaking.
All this may lead to unrest. President
Anwar Sadat tried to do away with Egypt’s
bread subsidy in 1977; he reversed his deci
sion within days after riots that had to be
quelled by the army. Ethiopia’s revolution
of 1974 followed an oilprice shock. Higher
food prices in 2008 and 2009 helped set off
the revolts of the Arab spring, and protests
that led to the toppling of Omar alBashir
in Sudan in 2019. In Rabat, Morocco’s capi
tal, riot police are already on the streets.
“Bread price hikes have long been a trigger
for riots in north Africa,” says Amin Rboub,
a Moroccan journalist. Many Arab and Afri
can governments have refused to express
support for either side in the RussiaUk
raine conflict, arguing that it is not their
war. They will feel its effects nonetheless.
Start with wheat, of which Russia andUkraine are, respectively, the biggest and
fifthbiggest exporters in the world. The
war has halted shipments from the Black
Sea. That is dire news for Egypt, the world’s
largest wheat buyer. It needs 21m tonnes a
year to feed its 102m people but produces
less than half of that. Russia and Ukraine
provide 86% of its imports (see chart).
This year’s budget assumed that im
ports would cost $255 a tonne. Prices on fu
tures markets are already flirting with
$400. That could add at least $1.5bn (0.4%
of gdp) to Egypt’s import bill. The price of
unsubsidised breadhas increased by 50%
in some shops in recent days.
AbdelFattah alSisi, Egypt’s authoritar
ian president, has never liked the bread
subsidy. “It’s unreasonable to sell 20 loaves
of bread for the price of one cigarette,” he
said last year. Soaring prices would give
him an excuse to try to change it. But he
may not like the reaction. Almost one
third of Egyptians live below the paltry of
ficial poverty line of 857 pounds a month.
Many of Egypt’s neighbours are in a
similar bind. Fadhila Rabhi, the Tunisian
trade minister, says subsidised baguettes
that sell for 190 millimes (six cents) already
cost 420 millimes to produce. The country
has a budget deficit of around 9% of gdp
and annual debtservice payments at
around the same level. In Lebanon, mired
since 2019 in a financial crisis, the price of
a bag of flatbread had already increased by
more than 400% in the two years beforeA DDIS ABABA, DUBAI, JOHANNESBURG, PARIS AND RABAT
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