Bread has always been a source of concern for rulers and leaders. When their prices increase, watch out for the public reaction. In history, bread riots brought down rulers who dared to make bread or its byproducts like flour hard to reach. In modern times, we often associate bread riots with low- and middle-income economies, but such riots also happened in western nations. Going back in history, Boston, for example, saw many such riots between 1710 and 1713. In 1775, many regions in France experienced violent riots called the Flour War. Perhaps one of the most infamous events related to food shortages is the Potato Famine, that began in 1845 and resulted in mass migration of Irish people to North America. More recently, we can list Morocco in 1981 and 1984, Tunisia in 1983/84, and the list is long.
Today, I am equally concerned about the increase in petroleum prices. Such move can wreak havoc on so many sectors, naturally including on food prices proper. In recent times, the consumption of key commodities in developing countries has been subsidized by governments because applying free-market rules would essentially result in hundreds of millions of people priced out, unable to buy these commodities. Global prices that are supposedly dictated by supply-and-demand have reached levels that without subsidies, millions of people will go hungry and political leaders could be at risk.
But recently, pressure on nations that have subsidies to prevent social unrest has reached levels that are unsustainable for the regimes in place. The latter are now pushing for subsidy reductions because those who loan them money demand it. When Nigeria’s president, Bola Tinubu, took office in late 2023, one of the first executive orders he signed was the removal of fuel subsidies. A quick look at the outcome shows an immediate spike in the cost of living, affecting all sectors of the economy. There is now a sense of pending social unrest in Nigeria, even as unrest has already begun among labor unions pushing for an increase in wages.
The same scenario is taking place in another big country, Egypt. Anticipating an incredibly difficult 2024, incumbent president Abdel Fattah El-Sissi changed the election date, bringing it to December 2023, instead of the schedules 2024 so as to be reelected before major tough decisions are made on the subsidy front. And he did not have to wait too long to pull the trigger.
As of January 2, 2024, electricity prices in Egypt jumped between 16% and 26%, and the authorities say this is part of a gradual removal of subsidies in the electricity sector. This means more price increases are likely.
Looking at the numbers, most would say electricity prices in Egypt are low even as they are increasing, settling between EGP 0.58 to EGP 1.65 per KwH, depending on level of consumption. The problem is not just looking at the actual price per se, but it is more importantly about the relative increases in percentage terms. The increases of electricity prices will have a ripple effect on the entire Egyptian economy the same way it having on Nigeria, affecting the industrial sector, pushing consumer prices to new heights. Egyptian households are not just seeing their electricity bill go up, but everything else is following with similar levels of increases, and a high probability of social disruption.
So now, after wishing each other a happy new year, Egyptians are confronted with a series of price hikes effective January 2024. For example, and according to Reuters, the prices for accessing the Internet went up 33%. The price of Cairo metro ticket rose by 20%. And that’s just the beginning.
As the year progresses, we are likely to see food prices rise to levels that are going to put the government on the defensive. And so 2024 for Egypt looks like a period of intense stress that could result in social unrest.
