Reference Date: 03-October-2013
FOOD SECURITY SNAPSHOT
Above average cereal harvest estimated in 2013
Below average cereal import requirement in 2013/14 envisaged
Food inflation easing slightly in August 2013 but still at high levels
Favourable weather conditions result in above average cereal crop
The 2013 winter grain harvest was concluded in May/June, while the harvest of summer crops (mainly maize and rice) is about to start.
Owing to favourable weather conditions, preliminary forecasts point to an above average cereal harvest. Official reports from Egypt’s Ministry of Agriculture and Land Reclamation indicated the highest ever winter wheat planted area of 1.43 million hectares in 2013, an increase of about 100 000 hectares on last year.
Below average cereal import requirement envisaged
Egypt remains the world’s largest wheat importer. Accordingly, cereal import requirements in the current marketing year 2013/14 (July/June) are put at about 15.4 million tonnes, about 16 percent higher than last year but some 4 percent lower than the five-year average.
While imports in the first half of 2013 were slow, the General Authority for Supply Commodities (GASC) announced that Egypt imported 780 000 tonnes of wheat of mostly Romanian, Russian and Ukrainian origin in between 18 July 2013 and 12 August 2013, driving wheat strategic inventories to suffice until the end of 2013. According to the reports, the Government aims to increase total wheat stocks to between 5 and 6.5 million tonnes by the end of the current fiscal year in June 2014. Imported wheat is mixed with local wheat to increase its gluten content. Millers reported of being advised to reduce the amount of international wheat in flour. As of late July 2013, the GASC purchased 3.7 million tonnes of wheat from local farmers, some 40 000 tonnes less than the same period of last year.
Of a particular concern remains the ability to import wheat and fuel, and the availability and prices of fertiliser. The deficit of petroleum products, especially diesel is likely to have a negative impact on harvesting and could hamper moving crops to urban centres.
Food inflation eased slightly in August but still at high levels
The annual food and beverage inflation rate in August 2013 was 12.86 percent compared to 13.86 percent in July 2013. The slight slowdown in food inflation was mainly attributed to lower inflation rates in August for fruit, vegetables, poultry, fish and seafood, eggs, due to the lower demand after the month of Ramadan. In the second quarter of 2013, food prices in urban Governorates increased more than in rural Governorates.
The Government’s expenditure on the bread subsidy programme and concerns over its sustainability together with the budgetary implications have provoked heated discussions in the country. According to the Egyptian Food Observatory, not all vulnerable households eligible for food subsidies have access to ration cards. Losses in the supply chain of subsidised Baladi bread stand at over 25 percent some of which could be reduced by improving storage facilities.
According to UNHCR, as of mid-September 2013, there were 124 373 registered Syrian refugees in Egypt. However, the UN Population Fund suggested in late September that the total number may be close to 300 000 individuals. As a response, WFP provided food assistance to 45 500 beneficiaries in August and planned to assist 61 000 beneficiaries in September.
Economic recovery strategy being planned
According to IMF, the GDP growth rate in 2012 was 2.2 percent, about one-third of the (2006-2010) average, while budget deficits from 11 percent in June 2012 to 14 percent in June 2013. In addition, between July 2012 and July 2013, the Egyptian pound suffered a considerable devaluation vis-a-vis the US dollar (from USD 1 selling at EGP 6.06 to EGP 7.1) thus increasing prices in local markets despite easing prices on the world markets.
To help economic recovery, the government is considering economic reforms: measures being studied include a value-added tax, limited tax exemptions for informal businesses to encourage registration, and widening the use of electronic cards to control distribution of subsidized fuel.
However, the main measure to spur economic growth will be a 22.3 billion Egyptian-pound (USD 3.2 billion) “stimulus package”, announced by the Government on 28 August 2013, after securing 12 billion dollars in assistance pledges from Saudi Arabia, UAE and Kuwait last month.
These funds, of which 5 billion dollars arrived last month, helped replenish Egypt’s foreign-exchange reserves. As of late August 2013, net international reserves held by the Central Bank of Egypt amounted to USD 18.9 billion, still about half the levels of early 2011, due to a widening trade deficit and the continued decline in revenues from tourism and foreign direct investments, but at the highest level in 20 months. In addition, the monetary inflow helped to stop the devaluation of the national currency, and in September the Egyptian pound slightly appreciated vis-a –vis the U.S. dollar for the first time since June 2012.
Of the USD 12 billion pledged to Saudi Arabia, UAE and Kuwait, USD 6 billion are interest-free deposits with the central bank that will be added to currency reserves, while USD 3 billion in grants will be invested in infrastructure, housing, education and health projects, while the remaining USD 3 billion will be in the form of strategic commodities such as petroleum products to cover local demand.
The government aims to boost economic growth to 3.5 percent in the current fiscal year from 2 percent in the year that ended in June.