The Impact of Food and Global Economic Crises (2008) on Food Security in Egypt

Transcription

1 African and Asian Studies 13 (2014) AFRICAN AND ASIAN STUDIES brill.com/aas The Impact of Food and Global Economic Crises (2008) on Food Security in Egypt Samah Sayed Ahmed Department of Politics and Economics, Institute of African Research and Studies, Cairo University, Egypt Abstract This paper aims to study how food security in Egypt influenced by the global rising of food prices occurs during the period and the global economic crisis beginning in In order to achieve the aim of the study, the paper was divided into three main sections in addition to introduction, the second one analyze the features of food crisis and its reasons and its effects on the poor and households. The third section represents the global economic crisis and its impacts on the most vulnerable households. The fourth section, analyze the status of food security in Egypt before and after the two crises, government response to food and global economic crises, role of international organizations in Egypt as a result of the two crises, the Arab awakening and its impact on food security, finally, the paper introduces some policy options to address food insecurity in Egypt. The main conclusion of the study is that the Egyptian economy is highly vulnerable to food and economic global shocks, and the status of food security after the two crises is classified as a serious case. Keywords food crisis global economic crisis food security food insecurity Egypt This paper aims to study how food security in Egypt influenced by the global rising of food prices occurs during the period and the global economic crisis beginning in In order to achieve the aim of the study, the paper was divided into three main sections in addition to introduction, the koninklijke brill nv, leiden, 2014 doi /

2 206 Sayed Ahmed second one analyze the features of food crisis and its reasons and its effects on the poor and households. The third section represents the global economic crisis and its impacts on the most vulnerable households. The fourth section, analyze the status of food security in Egypt before and after the two crises, government response to food and global economic crises, role of international organizations in Egypt as a result of the two crises, the Arab awakening and its impact on food security, finally, the paper introduces some policy options to address food insecurity in Egypt. In order to analyze the impact of the two crises on food security in Egypt, the paper used economic methodology tool (before/after)1 to compare the status of food security in Egypt after the two crises by its status before the two crises. 1 Introduction: Egypt as a Small Power in the Middle East and the Arab World Historically, Egypt is an effective regional power in Middle East and Arab world. Any political changes and internal policies in Egypt reflect itself positively or negatively in the two regions. For example, the July revolution (1952) led to political and social changes in the majority of its neighbor states, internal socialist policies in Nasser era (land reform, agriculture rotation, and industry) helped Egypt to achieve self sufficient, exports of Egyptian cotton helped Egypt to achieve food security in fifteen s and sixteen s. At the same time heavy industries helped Egypt to adapted import substitution strategy; these policies reflected Egypt s effects on neighbor s countries policies, majority of these countries tended to take the same policies. From seventeen s[?] Egypt changed its economic policy towards free market economies, this led to negative impacts on agriculture in forms of detraction in Egypt s production of cotton and cereals (wheat and maize) and increased production of vegetables and fruits in order to achieve the interest of the agricultural capitals, at the same time, as a result of privatization programme industrial production has detracted. 1 The before/after economic tool depends on comparing a time series data about each of: Food availability (production imports exports), Economic access to food (income food prices inflation) and Food utilization (food consumption patterns) before and after food and global economic crises in order to determine the impact of the two crises on the main pillars of food security in Egypt.

3 The Impact of Food and Global Economic Crises 207 Therefore Egypt become in need not only to import food commodities, but also to import all consumption and capital commodities, as a result of these policies Egyptian regional role detracted to the interest of Turkey, Iran, Syria, and Qatar. Egyptians hope to change these policies after the 25 January revolution. 2 The International Food Crisis ( ) 2.1 Features of the Crisis In the second half of 2006, world prices of most major food commodities began to climb. By the first half of 2008, international (US Dollar) prices of cereals had reached their highest levels in almost 30 years, threatening the food security of the poor world wide and provoking wide spread international concern over an apparent world crisis (Food and Agriculture Organization 2009:4). Food prices were up as much as 40% from their 2007 level and 76% from 2006 (Food and Agriculture Organization 2009:6). Table 1 represents trends in real commodity prices during It is clear that high food prices were not an opportunity seized by the majority of poor farmers in developing countries, their supply response was limited in 2007 and virtually zero in 2008 (Gilbert, C. 2006:25-37). According to World Bank data, by November 2010 global food prices have increased sharply. The US dollar based nominal World Bank food price index increased by 17% between August and November 2010 (Figure 1). Higher global wheat prices were transmitted to domestic markets in several wheat importing countries in August-November period, in many countries in Middle East and North Africa governments are bearing the brunt of the rise of global wheat prices as consumers are insulated by subsidies on the price of basic staples (World Bank 2010:1-2). Recently, the World Bank s food price Index increased by 8% from December 2011 to March The price of indices of grains, fats and oils, and other foods all increased in each month since January 2012 (World Bank 2012:1; Heady 2011:6) (Figure 2). 2.2 The Impact of Rising Food Rices The impact of high food prices is obviously most severe for the poor who rely on purchased food for the poor in developing countries, food can account for at least 50% and up to 70-80% of their budget. Thus, higher prices affect not only their food consumption in terms of quantity and quality, but also their spending in general (Serris and Christiaensen 2007:53). Rising food prices contribute to the overall rate of inflation in most countries, including developed

4 208 Sayed Ahmed Table 1 Trends in real commodity prices before and after the two crises FAO Food price Index ( =100) Bananas Beef Butter Cocoa Coffee Cotton Hides Jute Maize Rapeseed Rice Sisal Sorghum Soybean Sugar Sunflower Tea NA Wheat NA Source: Food and Agriculture Organization, 2009, The State of Agricultural Commodity Markets, High Food Prices and Food Crisis, Experiences and Lessons Learned, Rome: FAO, 58. NA = not available countries changes in food prices are important component of the general rate of inflation as measured by the consumer price index (Wolter 2008: ). 2.3 Why Did Food Prices Increase So Much? Bio fuels production: Additional demand for maize (a feed stock for the production of ethanol) and rapeseed (a feed stock for the production of biodiesel) have had the strongest impact on prices. For example, out of the increase of nearly 40 million tons in total world maize use in 2007, almost 30 million tons were absorbed by ethanol plants alone. Most of this expansion occurred in USA (Figure 3).

5 The Impact of Food and Global Economic Crises US$ (Nominal) US$ (Real) Nov-06 May-07 Nov-07 May-08 Nov-08 May-09 Nov-09 May-10 Nov-10 Figure 1 Food price index. Source: The World Bank, 2010, Food Price Watch, Poverty Reduction and Equity Group, Washington D.C.: World Bank, M M M M M M M M M M M M M M M M01 Figure 2 Food Grains Fats & Oils Other Food World bank food price index. Source: The World Bank, 2012, Food Price Watch, Poverty Reduction and Equity Group, Washington D.C.: World Bank, 1.

6 210 Sayed Ahmed Million Tonnes Figure 3 03/04 04/05 05/06 06/07 07/08 Feed use Other uses Ethanol use Exports Maize utilization and exports in the USA. Source: Food and Agriculture Organization, 2009, The State of Agricultural Commodity Markets, High Food Prices and Food Crisis, Experiences and Lessons Learned, Rome: FAO, 19. High oil prices also had a direct impact on the cost of agricultural production and prices. Rapid economic growth in certain emerging economics, notably China and India, increasing demand for food, especially for livestock products which generated increased cereal and oil seed demand for feed. Weather shocks, such drought in Australia ( ) that reduced wheat production and trade. Low Level of Stocks Slower growth of cereal yields (Food and Agriculture Organization 2011:11; Food and Agriculture Organization 2009:2). 3 The Global Economic Crisis In late 2008, as international food and fuel prices continued to fall, there was some optimism that the developing countries might be decoupled from the crisis and recession that had started in the advanced economics. This proved to be false hope, however, and major international organizations quickly revised their economic growth projections sharply down ward for all parts

7 The Impact of Food and Global Economic Crises 211 of the world, including the developing countries. While developing countries have been hit by many crises in the past, the current economic turmoil is different at least three important aspects: First, the crisis is affecting large parts of the world simultaneously, such as traditional coping mechanisms at national and sub national levels are likely to be less effective than they were in the past. Previous crises that affected the developing countries tended to be confined to individual countries or several countries in a particular region. Under such circumstances, these countries tended to rely on large exchange rate depreciations to help them adjust to macro economic shocks, while remittances represented an important coping mechanism, especially for poorer households. During the 2009 crisis, however, many countries have seen a substantial decline in remittance inflows. The scope for real exchange-rate depreciation is also more limited in a global crisis, as it is not possible for the currencies of all developing countries to depreciate against one another; some must appreciate while others depreciate. This situation has left developing countries with less room to adjust to the rapidly changing economic conditions. The second key difference is that the current economic crisis emerged immediately following the food and fuel crisis of While food commodity price in world markets declined substantially in the wake of the financial crisis, they remained high by recent historical standards. Also food prices in domestic markets come down more slowly, partly because the US dollar, in which most imports are priced. At the end of 2008, domestic prices for staple foods remained, on average, 17% higher in real terms than two years earlier. This represented a considerable reduction in the effective purchasing power of poor consumers, who spend a substantial share of their income (often 80%) on staple foods. The third factor is that developing countries have become more integrated, both financially and commercially, into the world economy than they were 20 years ago. As a consequence they are more exposed to changes in international markets (FAO 2009:9-10; International Monetary Fund, 2009:70). Figure 4 Illustrates both the increasing significance of remittances, their share in Gross Domestic Product (GDP) during represented a 50% increase over that of the 1990s and marketed increases in foreign direct investment (FDI). 3.1 Groups Will Be Most Affected by the Economic Crisis The economic crisis will negatively affect large segments of the population in developing countries. The position of those who were hurt most by higher food prices (The rural landless, female headed households and urban poor) is particularly precarious because they have already approached, or in many cases reached, the limit of their ability to cope during the food crisis. Among

8 212 Sayed Ahmed Share of exports of goods and services in gdp Percentage Share of workers remittances and fdi in gdp Percentage Remittances fdi Figure 4 Increased commercial and financial integration of developing countries. Source: Food and Agriculture Organization, 2009, The State of Food Insecurity in the World, Economic Crisis: Impacts and Lessons Learned, Rome: FAO, 10. these groups, the urban poor may experience the most severe problems because lower export demand and reduced FDI are more likely to cause employment to fall in urban areas, which are more closely connected to world markets than rural areas. But rural areas will not be spared-reductions in employment have caused back migration from urban to rural areas, forcing the rural poor to share the burden in many cases. In some countries, declining prices for specific crops will add to that burden. Thus, despite the recent fall in food prices urban and rural areas have experienced a reduction in various sources of income, including remittances, diminishing the overall purchasing power of the poor and food insecure (Hossain and Eyben 2009:11-12; Arieff 2009:25). 4 The Status of Food Security in Egypt before and after the Two Crises First of all we should study the literature of food security 4.1 Literature of Food Security Food security occurs: When all people, at all times, have physical, social and economic access to sufficient, safe and nutritious food which meets their dietary needs and food preferences for an active and healthy life. On the other hand food insecurity is defined as existing: When people lack secure access to sufficient amounts of safe nutritious food for normal growth and development, and an active and healthy life. Food insecurity may be

9 The Impact of Food and Global Economic Crises 213 caused by unavailability of food, insufficient purchasing power, inappropriate distribution or inadequate use of food at house level. 4.2 Main Pillars of Food Security Analysis Food Availability: The food that is physically present in the area of study, encompassing all forms of domestic production, commercial imports and food aid. This may be aggregated at the regional, national, district or community level. Food Access: A household s ability to regularly acquire adequate amounts of food, through a combination of its own home production and stocks, purchases, barter, gifts, borrowing or food subsidies. Food Utilization: A household s use of the food to which it has access, and an individual s ability to absorb and metabolize the nutrients, i.e. the conversion efficiency of the body. Economic access to food continues to be the most significant food security concern complicated by food price increases and a drastic reduction of livelihoods. Reduced cash incomes and low consumer purchasing power should be considered as forms of-market-induced shock for vulnerable households. Household food consumption is a reflection of both food availability in markets as well as the ability of households to access food. Therefore, food consumption is used as one of the main proxy indicators of the food security situation in Together, dietary diversity and frequency of food intake of various food types, according to world food programme (WFP) s standard methodology, are considered to be reliable proxy indicators of the accessibility of households to food. Three principal approaches are used in analyzing adequacy of food consumption at the household level: The first approach is per capita caloric intake and the share of each food group in total generated calories The second assesses the consumption of calories relative to calorie requirements and thus focuses on the sufficient consumption of food in quantitative terms. The third approach looks at the nutritional composition of diets and thus it considers aspects of dietary quality (World Food Programme, 2011:5, 16). 4.3 Methodology of Food Insecurity Risk Typology The indicator of overall food insecurity risk comprises two components: a macro-level and a micro-level measure of food insecurity. A country s macro-level food security is defined as the share of food imports divided by total exports plus net remittance inflows (food imports / [total exports + net

10 214 Sayed Ahmed remittance inflows]). The macro-level indicator captures the ability of a country to finance food imports through exports of goods and services and the net remittances received. Net remittance inflows are calculated as the difference between remittances received and remittances paid, the prevalence of child under nutrition (expressed as a percentage) is used as a micro-level food-insecurity indicator. High-income countries have a low food insecurity risk. Low- and middleincome countries (LMICs) are classified into five groups by level of food insecurity risk: low, moderate, serious, alarming, and extremely alarming. The categories of the macro- and micro-level indicators in combination define overall food-insecurity risk (Breisinger et al. 2012:14). This section will analyze the status of food security in Egypt, and how it influenced by food and global economic crises by analyzing food availability, economic access to food, food utilization (before and after the two crises), Government responses to food prices rising, the role of international organizations as a result of food crisis. As food security was one of the triggers of Arab Awakening, we will study the Arab Awakening and its impact on food security; finally we will present some policy options to address food insecurity in Egypt. 4.4 Egypt Macro-Economic Context The macro-economic context in Egypt has direct and indirect impacts on the status of food security. At the macro-level, the economy achieved high levels of real GDP growth during that was accompanied by increasing investment inflows, improving balance of payments, a decline in fiscal deficit to GDP and domestic debt ratios and stability in foreign exchange market, however little change has trickled down to lower income groups, poverty rates remained high and persistent inflation in consumer prices continued to threaten the real purchasing power of lowest income deciles. In spite of economic growth achieved, little structural change was felt, and inflation in food prices becomes appoint in major concern. CPI inflation for urban areas reached a peak of 23.6% in August 2008, driven by inflation in food and beverages index, which recorded 30.9% during the same month. Although prices started to decelerate after words for almost one year, inflation started picking up again in September 2009, but this time from a higher base value than in Food prices the main driver of domestic inflation in consumer prices, widely fluctuated, and for some food groups like vegetables inflation recorded 88%, thus, every inflationary wave had a compounded impact on consumers. It should be noted that although food subsides are a significant component of the poor s dietary intake, house hold in Egypt (even in rural areas) are net food buyers, and

11 The Impact of Food and Global Economic Crises 215 consumption of home-grown food represents only 9% of total food consumption (1.9% in urban areas and 17% in rural areas). Therefore, households are highly sensitive to inflation in food prices. The impact of fluctuations in world food prices on inflation and the cost of living in Egypt is strong. The country is a net food importer and relies heavily on costly consumer food subsides. According to (IMF) estimates, changes in world commodity prices account for approximately 34% of the variation in headline inflation in Egypt, with world food prices playing a much larger role at 39.8% than fuel prices at 3.3%. Accordingly, the Egyptian economy is highly vulnerable to global food price shocks. Egypt has been hit by such shocks twice in last 5-year period. The global food and fuel crises of led to spike in inflation rates, deterioration in current account balances, and increases in government deficits. The global financial crisis affected macroeconomic performance through a decline in foreign direct investment, as well as revenues from Suez Canal, and remittances (which represent the country s second biggest source of foreign revenue after tourism, accounting for almost 6% of GDP in 2007). The fiscal cost of food subsidies reached about 2% of GDP in 2008/2009 (3.8 US$ billion) after stabilizing at around 0.9% of GDP between fiscal years 1996/1997 and 2000/2001. The rising cost of food subsidies can be explained by increased international commodity prices, exchange rate, depreciation increased numbers and/or quantities of subsidized food items, and expanding coverage of ration cards. Unfortunately, in the absence of well designed targeted programmes, a significant number of poor remain unreached (Word Food Programme 2011:7-9). In order to study food security in Egypt we should study the following Food Availability Food Production Agriculture economic contribution in Egypt is gradually diminishing but is stills an important activity, accounting for 14% of GDP in The sector remains the country s largest employer, with about 30% of labour force. Although only 4% of women are estimated to be part of the labour force, their share is much higher in agricultural activities, representing some 40% of the agricultural labour force. The main productions are wheat, rice, cotton, beans, fruits, vegetables, poultry, cattle, water buffalo, sheep and goats. The country is self-sufficient in rice, sorghum and onions. Self sufficiency reaches 70%-80% for barley and sugar cane. However, coverage of consumption requirements is only 50%-60% for wheat, beans and maize, about 30% for vegetable oils, and 5% for lengths, soybeans,

12 216 Sayed Ahmed other oil crops, and fodder crops except berseem (70% self-sufficiency). Egypt is a major food importer owing to its large population and still rapid population growth (World Food Programme 2011:11) Crop Production Cereal Production: Cereals account for about half of the total cultivated area. The area planted under wheat is influenced by the purchase price of the government, which leads the other prices on the wheat market. Although some yield improvement is still possible, inter alia through better water management, the scope for further increasing wheat production beyond the average 8 million tons currently produced is limited (Croppenstedt et al. 2006:2). Over the past 25 years, the average production of cereals increased by about 55%, beans by 46%, oil crops by 24% and forage crops by 20%, the food production per capita index has progressed, but as the population also grew substantially during the period, it remains rather low at 199 in 2010 compared to a base 100 in and to the world average of 233 (World Food Programme 2011:11). Table 2 represents area harvested and production of crops in Egypt before and after the two crises. Livestock Production: Animal production contributes to more than 40% of the total value of agricultural production on average. Animal rising also plays a significant role for households income, generally more important than crop income. In 2007 there were an estimated 4.9 million cows, 4 million buffalo, 5.5 million sheep, 4.2 million goats and camels. Livestock productions in dominated by small farms (about 80% of the output) but the number of modern dairy and beef farms has increased over the past few years almost 40% of rural house hold owned animals in 2008 with a higher proportion among rural household in Upper Egypt (49%). Cattle are mainly kept for dairy production, but 80% of domestic red meat consumption comes from local production. In 2006, the country was almost 70% self-sufficient in red meat and more than 90% self-sufficient in milk. Table 3 represents Egypt production of livestock before and after the two crises. Capture Fisheries and Aquaculture: The national catch declined in 2005 to about tons; Aquaculture s activity is growing and has contributed to increase fish consumption by the population from 6.9 kg/person in 2000 to 7.9 kg/person in 2005, providing a source of good quality proteins, at cheaper price than meat (World Food Programme 2011:12-13) Food Imports, Exports and Market Supply Some of 95% of local production is consumed domestically, despite increased emphasis on cash crops for export, such as fruits and green beans. At national

13 The Impact of Food and Global Economic Crises 217 Table 2 Area harvested and production of crops in Egypt before and after the two crises Crops Area Harvest (1000h) Production (1000 tonnes) Cereals Starchy root and tubers Pulses Sugar crops Oil crops Vegetables Fruits Source: Food and Agriculture Organization, 2011, FAO Statistical Year Book, Rome: FAO.

14 218 Sayed Ahmed Table 3 Egyptian production of livestock before and after the two crises Production (1000 tonnes) Vine meat Sheep and goat Pig meat Chicken meat Milk Eggs Source: Food and Agriculture Organization, 2011, FAO Statistical Year Book, Rome: FAO. level, food availability is ensured by complementary imports to the domestic production in order to cover the consumption requirements of the population. Food Imports: Egypt is the world s largest wheat importer some 10 million tons of wheat and 5.6 million tonnes of other cereals should be imported for 2010/2011 marketing year. Maize and vegetable oils are the other main food items imported (Croppenstedt et al. 2006:3). A large part of the wheat imports is used for subsidized food system. The sharp rise in wheat and other food commodities prices have added substantially to the cost of Egyptian imports in 2010/2011. Figure No (5) quantity and value of main food imports in Food Exports: Cotton is Egypt s major agricultural export, Oranges, potatoes, rice, onion, fruits and vegetables are the most significant food exports as shown in Figure 6 and Table 4. The ratio of exports to food imports, which measures the ability of the country to finance its food imports out of total revenues, is low in Egypt at 6.9. Egypt is considered to be among the North African countries most vulnerable to food-price shocks because of the relatively weak fiscal balance to cover the cost, taking into account the large wheat and bread subsidy programme. Table 5 represents Egypt food balance in Economic Access to Food Food Prices and Inflation Inflation soared at an average of 18% in 2008 (with a high of 24% in August 2008) and gradually decelerated to an estimated 11% in 2010 and beginning of

15 The Impact of Food and Global Economic Crises Wheat Maize Vegetable oils Soybeans Sugar Meat Dairy products Beans, lentils Quantity (tonnes) Value (1,000 US$) 219 Figure 5 Quantity and value of main food imports in Source: World Food Programme (WFP), 2011, Secondary Data Analysis of the Food Security Situation in Egypt, Washington D.C.: WFP, Quantity (tonnes) Value (1,000 US$) Oranges Cotton Potatoes Grapes Rice Cheese Beans (green, dry) Figure 6 Quantity and value of main food exports in Source: World Food Programme (WFP), 2011, Secondary Data Analysis of the Food Security Situation in Egypt, Washington D.C.: WFP 17. Onions, dry Vegetable Frozen Olives Preserved Strawberries Fruit preparations The World Bank estimated a very high pass-through of international food prices to domestic food prices at between 60% and 80%. Rising food and fuel prices resumed inflationary pressures early Food and beverages accounts for more than 40% of the consumer price index. These inflationary factors will be exacerbated by the depreciation of the Egyptian pound as a result of the political crisis. Table 6 shows Egypt consumer price index before and after the two crises. Figure 7 shows consumer price change. Figure 8 shows Egypt food and beverages index.

16 220 Sayed Ahmed Table 4 Value of Egyptian food imports and exports before and after the two crises Crops Imports (1000 US$) Exports (1000 US$) Cereals Potatoes Sugar raw equiv Fruits Oil and Fats Meat Source: Food and Agriculture Organization, 2011, FAO Statistical Year Book, Rome: FAO.

17 The Impact of Food and Global Economic Crises 221 Table 5 Egypt Food Balance ( ) Quantity (1000 tonnes) Ratio to Food Supply Production (+) Exports ( ) Imports (+) Stock changes and other uses (-) Food supply (=) Production Exports Imports Stock changes and other uses Cereals Ex. beers Vegetable oils Sugar and sweeteners Roots and tuber clues Meats Milk ex. butter Source: Food and Agriculture Organization, 2011, FAO Statistical Year Book, Rome: FAO.

18 222 Sayed Ahmed Table 6 Egypt Consumer Price Index, total and food before and after the two crises (2000 = 100) CPI total CPI Food Source: Food and Agriculture Organization, 2011, FAO Statistical Year Book, Rome: FAO. 25 % change, year-on-year Jan 08 Mar May Jul Sep Nov Jan 09 Mar May Jul Sep Nov Jan 10 Mar May Jul Sep Nov Figure 7 Consumer Price Change (%) Source: World Food Programme, 2011, Secondary Data analysis of the food security situation in Egypt, Washington D.C.: WFP, 15. (point) Jan-11 Figure 8 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Egypt Food and Beverages Index. Source: The Egyptian Cabinet Information and Decision Center, 2011, Egyptian food observatory, Food monitoring and evaluation system, Cairo, IDSC, Issue 4, 4.

19 The Impact of Food and Global Economic Crises 223 The price of meat, dairy products, poultry, eggs and fish have increased in the past years owing to the rise of animal food prices, nominal wheat prices on the domestic market increased by 32% in 2010 and rice by 42% inflation is expected to peak at 15% during the rest of 2011 before slowing gradually to 10% as the exchange rate stabilizes and global commodities price ease (The Egyptian Cabinet Information and Decision Center, World Food Programme 2011:4-5) The Impact of International Food Crisis on the Food Price Level in Egypt In this section of the paper we will clarify the trends of prices on the world and their impact on the price level in Egypt for some important crops, both consumer prices and whale sale prices. Wheat: Global wheat prices have risen dramatically over the past five years, reaching their highest level in 2008, the rise in price of wheat in the year 2008 compared with 2005 was 85.3% for international price, 98.3% for Egyptian wholesale prices and 105.6% for consumer prices as shown in Table 7. Maize: The international price of corn in 2008 was increased and reached heights as the price per ton reached to 223US$, an increase of 61US/Ton from the previous year (see Table 8). Rice: Global price of rice in 2008 was increased significantly by rate of 90% compared to 2005 and an increase of 80% compared to While there was a decline in the price in 2009 it remains high compared to The price of rice has increased again in Price of rice in wholesale markets in Egypt has increased, but there was a decline in the price in 2009, but it still high compared with prices in 2005, 2007 (see Table 9). Table 7 Rate of change (%) in international, wholesale,and consumer price of wheat before and after the two crises (base year = 2005) Years International Wholesale Consumer Source: Ministry of Agriculture and Reclamination, 2011, Food Security Information Center, Impact of Soaring Global Food Prices, Cairo, FSIC, 6.

20 224 Sayed Ahmed Table 8 Rate of change (%) in international, wholesale, and consumer price of maize before and after the two crises (base year = 2005) Years International Wholesale Consumer Source: Ministry of Agriculture and Reclamination, 2011, Food Security Information Center, Impact of Soaring Global Food Prices, Cairo, FSIC 201, Table 9 Rate of change (%) in international, wholesale, and consumer price of rice before and after the two crises (base year = 2005) Years International Wholesale Consumer Source: Ministry of Agriculture and Reclamination, 2011, Food Security Information Center, Impact of Soaring Global Food Prices, Cairo, FSIC Sugar: The international price of sugar has risen since 2007 and had recorded the highest value in 2009, because the decline in global stock of sugar, which led to lack of supply in the market and higher prices, as Brazil (the largest product and supplier in the world) transformed a large part of their production to bio-fuels, as well as the serious flooding has led to sinking of a large proportion of sugar cane crop. Price of sugar in whole sale markets recorded the highest level in 2008 (increase rate 37.8%) and then dropped in 2009, but the consumer price reached its highest level in 2009 influenced by global increase in the sale price (rate of increased 41%) it is excepted to increase further in the coming years due to rising global price (Food Security Information Center 2011:4-20) (see Table 10).

21 The Impact of Food and Global Economic Crises 225 Table 10 Rate of change (%) in international, wholesale, and consumer price of surge before and after the two crises as (base year = 2005) Years International Wholesale Consumer Source: Ministry Agriculture and Reclamination, 2011, Food Security Information Center, Impact of Soaring Global Food Prices, Cairo, FSIC, Household Economic Access to Food The share of basic food consumed by household (wheat, vegetables oils, dairy products and meat) that come from own agricultural production is very low (less than 2% at national level and no more than 20% in rural areas). As a result, almost of the food consumed by household comes from market purchases, and economic access to food is determined by, (i) Income levels, (ii) access to other transfers in cash or in kind, (iii) market prices. Poverty: In the early 2000s, living standards were severely damaged by a protracted economic slump. This was blamed on poor governance, and served to focus attention on deep economic disparities among the population. Rapid economic growth led to a reduction in poverty between 2005 and 2008, from 23% to 19%, however the latest estimated that 22% of the population was poor in ; practically the same level as in 2005, possibly reflecting the full impact of the rise of food and economic crises in ( ). Even though overall poverty seemed to have decreased from 2005 to 2008, extreme poverty (inability to meet basic food needs) increased, reaching 6% of the total population. This may be due to the fact that the cost of living (based on the consumer price index) rose by 47% for the extreme poor between 2005 and 2008, compared to 28% for the better off (WFP 2011:17) (see Figure 9).2 Rural Upper Egypt continues to be the poorest region, hosting about half of the poor and 2/3 of the extreme poor in 2008 will above its share of 1/4 of the 2 Poverty is defined according to the cost of minimum basket of essential food and non food necessities, which differs according to the location and composition of households, according to (WFP) in 2008, the extreme poverty line was 4.5 Egyptian pounds per capita a day, and the overall poverty line was 6.1 Egyptian pounds per capita per day.

22 226 Sayed Ahmed 35% 30% 25% 20% 15% 10% 5% 0% HIECS Urban Rural National Figure 9 Extreme poverty Overall poverty Poverty in Egypt ( ) before and after the two crises. Source: World Food Programme, 2011, Secondary data analysis of the food security situation in Egypt, Washington D.C.: WFP, 17. total population of the country. Poverty is also expected to be high in slums in urban areas (World Food Programme 2011:18-20) (see Figure 10) Food Utilization (Egyptian Food Consumption Patterns) Based on FAO food balance sheet calculations, the average dietary energy supply (reflecting food availability) was 2780 kilocalories per person. The household income expenditure and consumption survey estimated the actual dietary energy intake at 2780 kilocalorie per capita/day, The level of kilocalorie intake was lower among income poor households (by 30%) compared to the wealthiest. The average diet is dominated by cereals (bread representing the largest share, often made mixed wheat and maize flour) vegetable oil and sweetened tea, with infrequent and seasonal consumption of vegetables and fruits, and relatively low-consumption of meat and dairy products, although these are increasing. This pattern reflects the cheap access to staples through the subsidy programme. Wealthier households are better able to complement the subsidized food with fresh products bought at market price. In rural areas, the relatively high market price of animal food also encourages sales rather than selfconsumption (see Table 11 and Figure 11). The 2008 WFP vulnerability survey also found that poor households mainly consumed cereals and pulses with very little amounts of meat, dairy products

23 The Impact of Food and Global Economic Crises % 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Figure 10 Metropolitan Governorates Lower Egypt- Lower Egypt- Urban Rural Upper Egypt- Upper Egypt- Urban Rural HIECS Evaluation of poverty rates in Egypt ( ) before and after the two crises. Source: World Food Programme 2011, Secondary Data analysis of the food security situation in Egypt, Washington D.C.: WFP, 18. Table 11 Share of dietary components in total energy consumption before the two crises Component % Cereals (excl. bear) Vegetable oil 3.9 Sugar and sweeteners 7.7 Meat and offal 3.00 Roots and tubers 2.00 Milk, egg and fish 3.7 Fruits (excl. wine of veg.) 9.00 Animal fats 1.4 Pulses 2.4 Others 3.1 Source: Food and Agriculture Organization, 2011, FAO Statistical Year Book, Rome: FAO. and fruits (more expensive items). Generally speaking household s consumption of animal food and vegetables decreased between 2005 and 2008 possible reflecting the rise of price. No significant differences were observed across geographical locations or between urban and rural areas, indicating that the dietary pattern was more linked to economic access at household level than to other conditions at local level (World Food Programme 2011:30).

24 228 Sayed Ahmed % kilocalories 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 10% 4% 8% 6% 52% Oil Sugar Dairy products Meat, fijish Vegetables, fruits Pulses lubers Cereals 0% Figure 11 Share of dietary energy supply after the two crises (2008). Source: World Food Programme, 2011, Secondary data analysis of the food security situation in Egypt, Washington D.C.: WFP, Most Vulnerable Social and Geographical Groups During Food and Global Economic Crises Vulnerability analysis provides dynamic and forward-looking analysis of the impact of shocks on household access to food, according to WFP house hold Vulnerability to food insecurity was determined by combining (house hold head education level, per capita food expenditures during the previous 7 days, per capita income, and per capita asset ownership). These factors were considered to be related to: (i) demographic characteristics, (ii) location, (iii) education of the head of household, (iv) access to social assistance, (v) household income, (vi) ownership of agricultural land, and (vii) ownership of productive assets. To determine the vulnerability rates in different governorates, the household vulnerability criteria above were complemented by access to cash transfers and food consumption patterns. About 1/5th of households in Upper Egypt, Lower Egypt and metropolitan areas were considered highly vulnerable to food insecurity in The highest proportions of vulnerable households were found in the rural areas of Upper Egypt governorates particularly Sohag (31%), Minia (26%), Giza (24%) and Assiut (21%), in the governorate of Alexandria (24%) in the metropolitan area, and in the governorate of Dakahlia (21%) in Lower Egypt. According to World Bank in 2008, the governorates of Sohag, Minia, Assiut and Fayoum in Upper Egypt presented the highest proportions of households vulnerable to food insecurity (between 32%-39%) A previous study conducted by WFP in 2005 using the same vulnerability criteria had found higher levels of

25 The Impact of Food and Global Economic Crises 229 vulnerability to food insecurity in Assiut (25%), Beni Suef (20%) and Sohag (17%) in Upper Egypt. The persistence of vulnerability to food insecurity among some households and areas between 2005 and 2008 despite economic growth was attributed to the increase in food prices, deterioration of employment and income-generating opportunities (particularly in rural areas) as a result of global economic crisis and loss of productive assets, including from the avian flu epidemics in 2006 ( Aboulenein et al. 2010:18-19). 5 Government Responses to the Two Crises 5.1 Food Subsidy and Price Control The food subsidy system is a part of a broader consumer welfare subsidizing transport, housing and energy. By providing citizens with their minimum level of food requirements at subsidized prices, the GOE aims to protect them from malnutrition and help them cope with individual and household food insecurity. There are two food subsidy programmes: 1 Ration cards, which cover 81% households that offer a pre-determined quota of rice, sugar, oil and tea, according to the number of household member. 2 Subsidized baladi bread, which is the largest component of food subsidies, is available to all Egyptians. The latest modifications took place in response to the 2006/2008 food and economic crises. In addition to increasing funding for bread subsidy, the government: Increased the number of people entitled to a ration cards, reaching an additional 22 millions beneficiaries. Doubled the amount of rice entitled at subsidized price through the ration card. Removed items such as beans, lentils and pasta. Unified the ration card system with only one card providing full benefits, instead of two (one for full benefits and one for partial benefits). Expand its small cash transfer programme; and Banned rice exports.

26 230 Sayed Ahmed The level of subsides for food subsidy programme varies according to commodities. For example, by the end of 2008 the government subsidized 75% of the market price of oil, 66% of the price of sugar and 40% of the price of rice. As in 2008, the rise of wheat prices in 2010/2011 will significantly increase government expenditures for the wheat flour and bread subsidies. However consumer are not fully exempted from the impact of global rise of prices as prices of non-subsidized wheat products, as well as other basis staples- such as lentils and animal products, have increased (Hannusch 2008:8-9). 5.2 Cash Transfers The government also contributes to pension funds and implements cash transfers in order to face the impacts of food and economic crises. 5.3 School Feeding Programme The government is implementing a national school feeding programme covering about 5.5 million children out of a total 12 million eligible children in the country s public schools. 5.4 Other Social Assistance Programmes In rural areas, community development associations seem to exist in numerous villages but are rarely active, informal safety nets also exist but more often in urban areas, the government provides a social insurance for public service employees in formal jobs, but none for causal workers and private sector workers (World Food Programme 2011:49-52; World Food Programme 2011:2728). 6 Roles of International Organizations in Egypt as a Result of the Two Crises 6.1 Food and Agriculture Organization (FAO) In the wake of soaring food prices, and in the context of the FAO-led Initiative on Soaring Food Prices (ISFP), an Inter-Agency Assessment Mission took place from 17 November to 4 December Based on its In-depth analysis of the poverty, food security and nutrition situations in Egypt, the Inter-Agency Assessment Mission recommended the development of a five-year investment programme for , involving both private and public sector funds, in the range of US$ million (LE billion), to address the short and medium-term food security and nutrition challenges faced by the poorest and most vulnerable population groups. Forty food micro projects were approved and implemented at various locations and covered various fields.

27 The Impact of Food and Global Economic Crises 231 Some examples of projects executed by FAO are: Project title: Intensification and diversification of agricultural production systems, in support to the SPFS in the New Valley Project budget: 243,000 $ Project duration: 01 Nov Jan 2009 Objectives: Help farmers in the New Valley governorate to improve their food security and reach rapid increases in cereal and horticultural crops Project title: Marine Resources Programme in the Red Sea Project budget: 3,200,000$ Project duration: 01 Jul Jun 2013 Objectives: Promotion and development of responsible fisheries management in the region (Food and Agriculture Organization 2011: 5-26). 6.2 World Food Programme (WFP) is the only WFP operation ongoing in Egypt and it follows a number of earlier Country Projects (CPs). WFP has had operations in Egypt since The overall aim of the CP is to strengthen Government capacity to reduce poverty, food insecurity and malnutrition in Egypt. The latest CP planned to assist 80,150 beneficiaries during the period January 2007 to January 2009 through the provision of 20,904 metric tons of food at a total WFP cost of US$7.98 million. The Executive Board also approved WFP s strategy for an expanded CP for a total of US$44.1 million, considering ongoing reform efforts by the Government of Egypt and the urgent need to improve Government foodassisted development activities. The additional funding up to US$44.1 million would allow WFP to reach up to 396,000 beneficiaries with direct food support. As of 23 May 2009, the CP had total funding of US$ 32.4 million (Adams et al. 2010:2-4). 7 Arab Awakening and its Impacts on Food Security in Egypt Few observers would have predicted the dramatic change over the past few months in the Arab World. Arab government appeared to be in tight control, and many Arab economies were growing around or above the world average over the past few years. Annual growth rate in Egypt, Jordan, Lebanon, Oman and Sudan averaged more than 6% between 2005 and 2010 and Syria, Tunisia and Libya grew at about 5% on average during the same period. Official poverty rates in most Arab countries are lower than in many Asian and Latin American countries.

28 232 Sayed Ahmed However, in the first years the new millennium, progress in child malnutrition and youth unemployment reduction stated and even reversed, despite continued per capita GDP growth. Both indicators reached alarming levels, with child malnutrition rising from 20 to 30% and youth unemployment from 20 to 35%. Thus, there is strong indication that growth in GDP has not trickled down to the people and that rising inequalities have, in fact, left many people worse off (Breisinger et al. 2011:1-2). Most Arab countries even these facing little protest recently, have been addressing people s dissatisfaction by putting out fires-implementing measures with immediate impact, such as lowering import tariffs and value-added taxes to bring down food and energy prices and raising consumer subsidies. Equally popular measures have been raising salaries among public sector workers and raising overall social security payments. Eight countries took one or more of these measures: Algeria, Egypt, Tunisia, Libya, Syria, Jordan, Morocco, and Kuwait. However few governments have targeted additional transfers specifically to the poor or have launched longer term policy reform. Most, if not all of these firefighting measures were used by Arab governments before most recently to alleviate the burden on the population after the global food and fuel crisis (Breisinger et al. 2011:2-3). (see Table 12). In Egypt, civil disturbances in early 2011 have already affected both permanent and seasonal workers engaged in hotels, restaurants and other touristrelated activities, as well as other sectors such as construction which are a large source of employment for the poor and potentially food-insecure. Food prices continue to remain a challenge to overall food security in Egypt in Events challenging the status of food securing in Egypt include not only the ongoing socio-economic impacts of the 25th January Revolution in Egypt, but also the repercussions of Libyan Revolution. According to FAO/GIEWS global watch, the large influx of people from Libyan Arab Jamahiriya (to Egypt) since 19 February Currently estimated at has increased the need for food, and other emergency supplies. 8 Some Policy Options to Address Food Insecurity in Egypt The Global Hunger Index of the International Food Policy Research Institute (IFPRI) classifies Egypt in low hunger category based on the combination of the proportion of undernourishment in the population, the prevalence of underweight children under-5, and the under-5 children mortality rate. The average dietary energy available for consumption was at 2780 kcal/ person/day in In , about 1/5 the population was living