Scobie, G.M.
(1983)
Food subsidies in Egypt: their impact on foreign exchange and trade.
Other.
International Food Policy Research Institute, USA .
Abstract
Controls and subsidies on basic foods have been a characteristic of Egyptian food policy since 1952 as part of a strong commitment to social equity, and since the mid-1970s the size and coverage of these subsidies has grown rapidly. The impact of such policies is examined with a model drawn from the monetary approach to the balance of payments. It is established that Egypt's extensive system of food subsidies has affected the rate of inflation, the balance of payments, and the exchange rate. In addition, it has destabilized industrial output and investment, imposing real costs on the economy. In recent years Egypt's ability to acquire additional goods and services has been bolstered by buoyant export receipts and foreign loans and grants. Some of these favourable circumstances may prove transitory. In that case the real costs of all existing subsidies will become more apparent and disruptions to the non-farm sector more pronounced. Efforts to restrict the benefits of subsidies to those most deserving could well be rewarded by lower inflation, a decline in the real volume of imported food, and enhanced conditions for industrial output and investment. Such changes would seem to be consistent with the spirit of the economic policies introduced in the mid-1970s
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