Continued high food inflation a result of Egypt’s failed food security policy

By Saker El Nour, Mohamed Ramadan, and Sylvia Kay | 24 May 2024

Egypt made international headlines when the official inflation rate reached highs of over 40% in September 2023, driven primarily by inflation in food prices. To address these challenges, the Egyptian government announced decisions to ban the export of a number of agricultural commodities, including onions and potatoes, following on from an earlier ban on the export of rice.

These measures did not work: inflation for some commodities, such as onions, exceeded 423.1% on an annual basis. Food inflation rates stood at 63.9% on an annual basis, reaching 71.1% in October 2023, placing Egypt first among the ten countries in the world most affected by food price inflation. According to the World Bank‘s recently published Food Security Update report (table below), from April 2023 to March 2024, Egypt’s food inflation rates showcased a turbulent economic landscape, with significant monthly fluctuations.

In the latest update, Egypt remains among the top ten most affected countries, ranking fifth in April 2024 with a real food inflation rate of 12%.

A structural agricultural trade deficit

Egyptian officials maintain that a combination of local and global factors have exacerbated the country’s economic difficulties. However, record food inflation is indicative of a more profound systemic problem with the country’s agricultural and food policy.

For over four decades, Egypt, with the support of major institutions like the International Monetary Fund, the World Bank, and the United States Agency for International Development, has been resolutely pursuing a programme of agricultural liberalization with production geared towards the export of high-demand crops such as fruits and vegetables to consumer markets in Europe and the Gulf region. This strategy, aimed at enhancing the country’s hard currency reserves, placed Egyptian agriculture at the forefront of national development.

However, this export-led growth model has yet to yield a trade surplus with agricultural exports lagging behind since the 1980s and currently not exceeding 30% of the country’s import needs. Egypt faces an enduring deficit in its food trade balance, with self-sufficiency rates for critical crops such as grains progressively diminishing. The focus on shipping out raw, unprocessed goods has not kept up with the substantial grain imports needed for food security. Consequently, Egypt has become the largest importer of wheat globally, underscoring its deepening reliance on international markets to feed its population—a reliance that persists despite the contributions of local, small-scale farmers.

Egyptian small famers lose out

This export led policy was touted as a means to enhance farmer incomes and improve agricultural production and sustainability via international trade agreements. However, as a recent study published by the Transnational Institute shows, rather than delivering for the vast majority of Egyptian small farmers, the current agricultural trade model has only worsened their situation.

This is exemplified in the case of potatoes – Egypt’s second largest export crop to the EU. With rising input prices since the beginning of 2022 resulting from the liberalisation of the exchange rate and the devaluation of the local currency, many farmers have been forced to sell their potato crops at a loss. According to field work with Egyptian potato farmers carried out for the study, a farmer can earn an estimated maximum profit of EGP 2,375 per feddan (an Egyptian agricultural land unit equivalent to about 0.42 hectares): below the minimum wage of EGP 3,000 per month. According to farmers, the cost of production per feddan in the old lands and the Delta was almost EGP 40,000 in 2020 and has increased in recent years. These additional costs are passed on to the consumer, leading to higher prices of potatoes in urban areas.

All of this has resulted in significant food security challenges for both the urban poor and for over half (57%) of the Egyptians that live in rural areas. Egypt is a food-insecure country ranking 77 out of 113 countries on the 2022 Global Food Security Index.  Inflation of grain prices has affected the living standards of most Egyptians who rely on bread and grains to meet 35–39% of their daily caloric intake. From 2014 to 2020, about a third of the population suffered from malnutrition and 20-25% of under-fives were affected by stunting. Poverty increased from 16.7% in 2000 to 29.7% in 2020, and undernutrition also grew from 14% in 2009 to 25% in 2018.

A new approach is needed

The intricate interplay between economic policy and food security is particularly pronounced in developing nations, where strategies often intertwine neoliberal tenets with localized forms of crony capitalism. In Egypt’s case, this combination has exacerbated both the broader economic fragility and the specific vulnerability to debt crises. This is attributed to the country’s dependency on imports to meet its basic food security needs.

This situation underlines the urgency of revitalizing local food systems that are resilient, sustainable, and inclusive, particularly for marginalized and vulnerable populations. There’s a growing need for Egypt to re-evaluate its approach to agriculture, shifting away from large-scale exports that offer minimal added value to the economy or its people. Instead, a pivot towards bolstering small-scale farming and shortening supply chains could enhance self-sufficiency and ensure food sovereignty.

Saker El Nour is Program Director at the Action Network for a Just Transition in North Africa and the Middle East (RESEAU TANMO).

Mohamed Ramadan is an independent economic researcher and financial analyst. His research interests focus on inequality and poverty and processes of financialization in Egypt and the Global South.

Sylvia Kay is a Project Officer at the Transnational Institute.