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Egypt in turmoil faces looming food crisis

July 17, 2013 at 12:29 PM   |   Comments

CAIRO, July 17 (UPI) -- Egypt faces severe food shortages in the months ahead and its military rulers are pinning their hopes on a bumper wheat crop to see the country through.

There are fears that even if the home-grown harvest is up to expectations and produces the 9.5 million metric tons officials predict, that won't be enough to feed the country's 84 million people.

The U.S. Department of Agriculture estimates the upcoming crop will total 8.7 million tones, 10 percent lower than the Egyptians forecast, and warned several "knowledgeable interlocutors" expect the crop to produce only 6 million to 7 million metric tons.

Bassem Ouda, the minister of supplies in the government of President Mohamed Morsi -- who was ousted by the army July 3 -- admitted last week the state has less than two months' supply of imported wheat in stock, or about 500,000 metric tons.

The government has 3 million metric tons of Egyptian wheat from the spring harvest, which could last until October at current rates of consumption. But because of growing financial problems and difficulties accessing foreign currency as the political crisis deepens, Egypt's access to foreign wheat is dwindling.

That means bread shortages, and with about 40 percent of the population living below the poverty line -- subsisting on heavily subsidized bread that sells at the equivalent of 1 U.S. cent a loaf -- that could trigger widespread social unrest.

Egyptian cities were convulsed by riots in 1977 when the former regime of President Anwar Sadat raised the prices of key staples and slashed the bread subsidy. The government had to rescind those moves to restore order.

In the global food crisis of 2007-08, the price of wheat in Egypt was pushed to an all-time high and there were widespread shortages.

High food prices persisted and were a key factor in triggering the pro-democracy uprising in January-February 2011 that brought about the downfall of longtime dictator Hosni Mubarak.

Egypt is the world's largest importer of wheat, usually around 10 million metric tons a year. The Arab world's most populous nation halted purchases of foreign wheat in February as Morsi's Muslim Brotherhood government struggled in vain to cope with a worsening economic crisis triggered by the 2011 revolution.

There's been a sharp drop in foreign currency reserves since the revolution that toppled Mubarak in February 2011 -- from $36 billion to $14.9 billion at the end of June -- as investment and tourism dwindled.

Economic analysts say that's well below the critical level to cover three months' imports. At the same time, importers are finding it difficult to access foreign currency because of the growing uncertainty about Egypt's stability, even though the Central Bank has given food importers top priority in accessing foreign exchange.

Now the country is in dire need of foreign currency to pay for imports of wheat and other foodstuffs, as well as fuel.

The political crisis stalled negotiations with the International Monetary Fund for a $4.8 billion loan -- and a further $10 billion in assistance if the loan is secured -- that have been dragging on for two years even though the deal was seen as crucial for efforts to stabilize the economy.

The IMF wants painful economic reforms, including slashing bread and fuel subsidies, at which Cairo, fearful of whipping up further turmoil, is balking.

Egypt has been bailed out by hefty handouts from other Arab states who see a stable Egypt as vital for nudging back to some semblance of normality a region that's been convulsed by political turmoil since the so-called Arab Spring broke out in early 2011 -- toppling dictatorships in Tunisia, Egypt, Libya and Yemen and triggering a civil war in Syria.

In recent days, the oil-rich Persian Gulf petro-monarchies of Saudi Arabia, Kuwait and the United Arab Emirates have collectively coughed up $12 billion in loans, grants, deposits and oil to prop up the military-backed interim government of caretaker Prime Minister Hazem al-Beblawi, an economist and a former finance minister who favors cutting subsidies.

Even that may not be enough to get Egypt out of the mess it's in.

The road to economic recovery and political stability "will be long and require much external assistance -- well beyond that which has already been offered bilaterally and multilaterally," consulting firm Oxford Analytica cautioned.

© 2013 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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