The head of the U.S. aid program here says the Egyptian government plans to forge ahead with its politically delicate policy of reducing massive food subsidies despite a protest riot over price increases at the end of last month in which at least one person was killed and 30 injured.
"This government is determined to tackle the problem of subsidies," said Michael P. Stone, following talks with a number of ministers.
No economic issue is more sensitive to the Egyptians or to western aid donors than the long-established tradition of the government subsidizing basic food items, such as bread, cooking oil and sugar, to ensure social and political peace among this country's 48 million people.
This coming year food subsidies alone will cost the government more than $2 billion, and the "hidden subsidies" for oil -- the difference between local and world prices for the product -- are estimated at more than $3 billion.
In January 1977, price increases touched off rioting in Cairo and Alexandria that resulted in 79 deaths, 800 injuries and massive damage. That event has shaped the thinking of Egyptian policy-makers ever since.
In the past year or so, however, the government has moved to end all price controls on fruits and vegetables, instituted eight small increases in electricity and laid plans for price increases across the board. It has sought to avoid stirring protests by simply not announcing most of the increases.
This month the government will begin introducing red and green cards to separate low- from high- income groups, obliging the latter, with red cards, to buy goods at the state-run stores at higher prices.
The U.S. government has been pressing Egypt for years to adopt just such measures, with some congressmen demanding that the Agency for International Development use its leverage to force the reforms.
Stone skirted the question, saying only that there was an ongoing "policy dialogue" with the government.
"We talk through these problems with our counterparts," he said. "I don't think it's pressure." Western aid donors have been concerned that President Hosni Mubarak would backtrack on his policy of increasing consumer food prices after the riot in the mill town of Fafr Duwar on Sept. 30. The same day, Mubarak canceled some price increases to prevent riots breaking out elsewhere.
However, Stone said he was "optimistic" after listening to ministers that the government planned to go ahead in implementing other price rises and cutting back on subsidies.
Elimination alone of the staple one-penny flat bread, long the symbol of the subsidy policy to poor Egyptians, will save the government around $300 million, according to Egyptian sources.
Stone was interviewed shortly before departure from here at the end of his two-year tour. He is returning to Washington to take a top post in connection with the administration's Caribbean Basin Initiative.
A former business executive brought in from the outside to shake up the $1 billion annual AID program here, Stone stirred considerable controversy within the agency because of his outspoken criticism of many of its practices.
He raised a furor early by publicly stating that he thought the agency had wasted hundreds of million of dollars on a number of "turkey projects" in Egypt.
Despite the uproar in Congress and in AID, Stone got more than $100 million committed to such projects switched.