by Staff Writers
Cairo (UPI) Apr 17, 2013
The Egyptian government is gambling that this year's domestic wheat crop will produce 9.5 million tons, a prediction widely seen as dangerously over-optimistic as the world's most populous Arab state is wracked by growing political crisis.
Egypt, the world's biggest wheat importer, is facing critical food shortages that are certain to worsen the political turmoil if not checked.
The country's foreign currency reserves are seriously depleted after two years of economic upheaval following the downfall of longtime President Hosni Mubarak in February 2011.
Some estimates say reserves have slumped 63 percent -- from $30 billion to $13.4 billion -- since Mubarak was forced to step down.
That means Cairo doesn't have the funds to buy wheat, the main food staple for the country's 84 million people.
Bread is heavily subsidized, selling for less than 1 cent a loaf. If the subsidy is reduced, the social discontent would be potentially disastrous in the current unrest.
This has evoked memories of the food riots that engulfed Egypt in 1977 when the government hiked the prices of subsidized staples.
The embattled Muslim Brotherhood government of President Mohammed Morsi has slashed planned wheat imports because of the currency crunch, pinning its hopes on what it predicts will be a bumper domestic crop of 9.5 million tons, 7 percent bigger than 2012.
But the U.S. government warned Morsi's administration this month that it was over-estimating the size of the coming wheat harvest by as much as one-third.
The report, written by the agricultural attache at the U.S. Embassy in Cairo, estimated the crop would be around 8.7 million tons, or 10 percent lower that Cairo's projection.
The Americans also warned that the forecast of "knowledgeable interlocutors" was even lower, at 6 million-7 million tons.
The Egyptian forecast also failed to take into account possible fuel shortages arising from the currency crisis that would affect the coming crop by snarling distribution of wheat after the harvest.
"Disruption of the harvest because of a diesel shortage would have extremely damaging political consequences for the Islamist government," the Financial Times warned.
"Not only would it have to spend precious foreign currency on importing wheat but it would have to contend with the anger of farmers across the country, which would strengthen political opposition."
The government maintains there will be no shortages. Nasser al-Farash, the Supply Ministry spokesman, said "all indications" show the government's right on target and that there were no concerns about supplies of diesel -- even though Cairo owes foreign oil companies $5 billion.
Meantime, the government's wheat reserves have been reported to total 2.2 million tons, enough to cover subsidized bread for 81 days, slightly less than three months.
"If we get 4 million tons locally, we'll have enough wheat for five months beyond June," said Nomani Nomani, until March the Supply Ministry official in charge of wheat imports.
"That will give us enough time before we need go back to the international market," he told the Financial Times.
But the economic situation is becoming dire. Asia Times Online observed that the collapse of the Egyptian pound to 60 percent of its 2013 rate against the U.S. dollar "has priced everything but bread out of the reach of the poorer half of the population, and the bread supply itself is now at risk."
The currency's slide will raise the cost of imports even further and magnify the extent of the widening crisis.
Fuel supplies are low. The trade deficit is running at $32 billion. The country's scraping by on foreign aid but that's running out.
Morsi is going to have to make tough economic reforms that won't go down well with struggling Egyptians.
The gas-rich Persian Gulf emirate of Qatar, seeking to extend its influence in the Arab world, on April 10 pledged $3 billion. Libya has fronted with a $2 billion interest-free loan.
Cairo's negotiating with the International Monetary Fund for a $4.8 billion loan, which would spur Western investment.
But "Cairo's growing dependence on financial assistance from neighboring countries underscores just how desperate Egypt's economic situation has become," said the U.S. global security consultancy Stratfor.
"The worry now is that Egypt could collapse politically and economically, and that the ensuing instability could spread westward across the Maghreb and eastward across the Sinai Peninsula."
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