Egypt allots extra $1,7bn to fight food inflation

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Egypt’s cabinet has approved an extra 10 billion Egyptian pounds over the next three months to help slow rising food prices, the state news agency said on Wednesday.

The draft supplement to finance subsidies in the budget that ends on June 30 will now be sent to the Supreme Council for armed forces for final approval.

Egypt’s Prime Minister Essam Sharaf directed that food supplies offered at government cooperatives and other distribution points be increased to lower prices, MENA said.

The absence of the main government wheat buyer GASC from the market for over a month has become a talking point for trade, with some saying its financing has been cut off amid economic problems after a revolt that ousted President Hosni Mubarak.

Egypt, which relies on imports for at least half of its domestic consumption, is likely to suffer further food price inflation after the UN Food and Agriculture Organisation said global food prices could rebound as demand grows and supplies tighten.

Inflation in urban food and beverage prices, which account for 44% of the weighting of the basket Egypt uses to measure inflation, soared to 20,5% in the year to March, up from 18,2% in February.

Egypt, the Arab world’s most populous country, subsidises key staples, including wheat, sugar, rice and vegetable oils, ensuring domestic prices are stable and global hikes are contained.

About 63 million Egyptians benefit from food subsidies. GASC said in early March it had enough supply for at least five months.