Sugar crash sparks crisis in Egypt

CNN  — 

A spoof video circulating on Egyptian social media neatly illustrates the effect of the nation’s ongoing sugar shortage.

A cluster of youths on a Cairo street corner trade packages of illicit white powder - that is revealed to be the sweet stuff.

Truth is barely stranger than fiction in this case. The government has seized 9,000 tons of sugar in raids across the country, as though it were contraband.

The crackdown on “hoarders” has extended from an unfortunate waiter to the leading food producer Edita, which lost 2,000 tons to the inspectors and promptly halted production.

“If the government has a problem, they should come and negotiate, but this way of seizing stocks and treating us as smugglers is shameful,” Edita chairman Hani Berzi complained in a subsequent interview on Egyptian television.

Mounting crisis

The crisis has now extended for several weeks, and tensions are running high.

Many shops are running dry of the precious commodity, with images of empty shelves and long queues buzzing around social media. The price has doubled in stores that still have supplies.

Public protests are spreading in a country that has been intolerant of dissent under President Abdel Fattah al-Sisi. A taxi driver recently set himself on fire in Alexandria in protest at high food prices, and a Facebook page calling for a “Revolution of the poor” has gained thousands of supporters before being shut down.

Consumers are increasingly turning to the black market, where prices are also sharply escalating.

Prohibitive imports

The crisis has arisen from a collision of local and global factors.

Egypt has long consumed more sugar than it produces, plugging the gap through imports.

But government tariffs on foreign sugar, combined with high global prices, and a shortage of foreign currency, have made imports prohibitive.

The market has also been hit by cuts to subsidies for staple goods that the vast majority of Egyptians rely on, as part of an austerity program the government is undertaking to meet the terms for a $12 billion loan from the International Monetary Fund.

Egyptian ministers have blamed hoarders for the short supply, and media for stoking a sense of panic. Supply Minister Mohamed Ali El-Sheikh recently announced that the country has over four months of sugar reserves, while raising the price of subsidized sugar by 40%.

egypt sugar

Wider issues

Sugar is not the only vital commodity in short supply. Rice, cooking oil, and certain medicines have also been harder to come by in recent months.

The wider economy is in decline, with vital industries such as tourism still reeling from the aftermath of the country’s revolution in 2011. The value of the Egyptian pound has been declining for years.

The country’s poor can expect more pain, says Angus Blair, head of Cairo-based think tank the Signet Institute.

“There will be other cuts. the fuel subsidy will be cut,” says Blair. But he adds that the most vital subsidized goods should be spared, including bread.

The analyst believes the cost-cutting program is inevitable as the longstanding subsidy system in unsustainable.

“The key message from the parliament is that this is painful but we have to go through it,” he says .”It is impossible to continue the massive subsidy program because we can’t afford it.”

Blair believes the cuts will lead to greater investment and longer-term stabilization.

But in the meantime, the government will have to withstand the growing anger of its sugar-starved public.