What's the future of food subsidies in Egypt?
n Egypt’s current context of wide-ranging economic reforms, there is growing momentum to improve the longstanding Tamween food subsidy system. Tamween’s ration cards benefit around 70 million people, while the bread subsidy benefits around 83 million people, and together they make up about 6% of the government’s budget.
A May workshop in Cairo organized by the World Bank under the auspices of the Ministry of Supply and Internal Trade (MoSIT) explored the potential for expanding Tamween and examined food subsidy programs in the Philippines, Indonesia, and the United States.
World Bank Country Director for Egypt, Yemen and Djibouti Marina Wes emphasized the potential expected gains of reforming the subsidy program, and the importance of learning from other countries while contextualizing to Egypt-specific conditions. Minister of Social Solidarity Ghada Waly highlighted the government’s efforts in creating a unified national registry for Egypt and the importance of a single strategy for social protection, for both the Ministry of Social Solidarity (MoSS) and MoSIT. Minister of Supply and Internal Trade Ali Moselhy also stressed the importance of creating a more efficient subsidy system targeted at the poor and most vulnerable, allowing households to buy what they need the most.
Lessons from social safety net reforms in the Philippines, Indonesia, and the United States
The Philippines’ social safety net program currently covers 4.4 million families, including 10 million children. Some of its key challenges, according to Corazon Juliano-Soliman, former secretary of the Philippines Department of Social Welfare and Development, have been inclusion and exclusion errors—and convincing middle-class families they were not eligible, while making the case for the program’s value to the poorest households.
"Tamween’s ration cards benefit around 70 million people, while the bread subsidy benefits around 83 million people, and together they make up about 6% of the government’s budget."
Research and studies were critical to finding solutions to those challenges. A proxy-means test (PMT) mechanism for improved targeting was developed, gaps in schools and health facilities were identified, and grievance and verification systems were put in place. A communication campaign was also designed and implemented through media outlets to highlight (indirect) benefits of the program to keep kids in school, and in good health.
In Indonesia, rice subsidies started in 2002, through the Bantuan Pangan Non-Tunai (BPNT) program, which offers non-cash food assistance through e-vouchers at local retailers’ shops. For improved health and nutrition outcomes, the program was expanded to cover eggs and other nutritious food, including meat and baby formula. At the beginning of the program, according to Vivi Yulaswati, director of Alleviating Poverty and Development of Social Welfare at the Indonesia Ministry of National Development Planning, inclusion errors were very high, with more than 50% of the population reached. This prompted policy makers’ interest in studying the program to improve it. Reform began with a one-year pilot study in seven cities. This was scaled up to 44 cities a year later and 200 cities the following year, before becoming nationwide. Continuous monitoring and evaluation benefited subsequent phases. Aligning with other ministries and stakeholders, political support from the president, and communication were also key for targeting different audience groups, Yulaswati said.
The Supplemental Nutrition Assistance Program (SNAP) serves around 40 million Americans, making up around 0.13% of the federal budget, with the main goal of reducing food insecurity. Eligibility for the program is based on income and asset tests; benefits are a function of income and family size. According to University of Illinois Prof. Craig Gunderson, most people are on the program for one year or less, and two thirds exit after two years. The program’s targeting is known to be good, mostly due to the long procedures and time required to apply. Targeting outcomes and the short average program enrollment duration, may also be explained by the social stigma surrounding being in the program.
Food subsidy reforms in Egypt can accelerate economic growth and reduce poverty
Ongoing IFPRI research, based on an economy-wide model, developed with the Central Agency of Public Mobilization and Statistics (CAPMAS) and the Ministry of Planning, Monitoring and Administrative Reform (MoPMAR), provides additional evidence on the potential benefits from food subsidy reforms in Egypt. Reducing the number of beneficiaries and better targeting of Tamween will accelerate economic growth and reduce poverty, especially if the government uses the savings to reduce the deficit. In addition to better targeting, gradually moving to a cash-based subsidy is likely to have the most positive impact on economic growth and poverty reduction.
These findings strongly support MoSIT’s plans to better target food subsidies as an important first step. In parallel, MoSIT may consider changing the modalities of Tamween (e.g. move towards a cash or cash-for-food based subsidy system). Evidence from other countries seems to favor cash, if food markets work well, as giving cash is generally cheaper to administer and better for nutrition outcomes. A main concern of moving to cash (or cash-for-food) is often food price inflation, especially if the transfers are not regularly adjusted for inflation. MoSIT’s best starting point for changing Tamween’s modalities may be small pilot projects for both cash only and cash-for-food in selected communities. The insights gained from such pilot projects would put MoSIT in a strong position to decide on the most promising way forward for food subsidy reform in Egypt.
(Main image: Customers hold out subsidy cards as they buy fresh bread on December 15, 2016 in Cairo, Egypt - Chris McGrath/Getty Images)
The opinions expressed in this article are those of the author(s) and do not necessarily reflect the views of SAIIA or CIGI.