How a decade of IMF reform crumbled Egypt’s food subsidy system
Egypt’s food subsidy system (tamween) has never changed as radically as it has in the past decade. Food subsidies’ share of government spending fell from 5.3% in FY2014/15 to 3.4% in the current fiscal year. Access to subsidized bread, once open to all, is now restricted to holders of the green tamween smart card. The government also shrank the loaf, from 130 grams to 110 grams in 2014 and to its current 90 grams in August 2020.
The price of a subsidized loaf, fixed at five piasters since 1989, rose to 20 piasters in June 2024. This June, the government announced a restructuring of the bread system, with plans to cut the weight to 70 grams and exclude hundreds of thousands of people deemed “ineligible.”
The share of the population receiving subsidized goods through smart cards also dropped, from 77% in 2014 to 52% in July 2026.
All of this took place against a backdrop of extremely high inflation, with the cumulative rate reaching 367% between 2014 and 2024. More importantly, once food price inflation is factored in, the figure rises to 405% (from 2014–2023).
Beneath these explicit, quantifiable changes lie deeper transformations: the commercialization of the tamween system between 2014 and 2026. The IMF, a near-constant presence through its financing agreements for most of that period, backed it strongly.
The IMF’s indirect pressure
In its recent financing agreements with Egypt, the IMF did not propose ending food subsidies, as it did with energy subsidies. This caution most likely reflects the lasting mark the Arab Spring left on the institution.
In the past, the Fund forcefully demanded curbs on food subsidies. Faced with popular uprisings, it made a show of acknowledging the need for more inclusive growth and stronger social safety nets.
Sparing food subsidies did not mean the IMF accepted the decades-old status quo. Its relationship with the tamween system was more complex and indirect than its intervention in energy subsidies. The Fund did not demand abolition. It pushed for transparency, cash transfers, and direct targeting.
Presented as a means of effective reform, those demands steadily eroded the benefits citizens received and pushed hard toward commercializing the system.
Tamween is no longer a pillar of social protection but a transitional system. Most likely, targeted cash transfer programs like Takaful and Karama will replace it in the medium term.
Cash instead of food
The IMF’s hostility toward subsidies has two roots. The first is fiscal: it argues that subsidies drain the state’s budget and undermine fiscal sustainability. The second is theoretical: the IMF adopts a vision based on competitive equilibrium theory, which holds that economic efficiency can only be achieved in an ideal market where the final consumer price aligns with the cost of production.
By this logic, government intervention to lower prices (by selling subsidized goods) distorts the market and creates an economic imbalance. If the government’s sole aim is to help the poor, the IMF believes, handing out cash is better than interfering with product prices.
That logic shaped every restructuring step in Egypt since 2014. The first major adjustment, a cash allowance to buy available goods in place of in-kind quotas of basic food commodities, reflects the IMF’s theoretical framework directly.
The flaws of the cash allowance soon became apparent. It was initially set at 15 pounds per person, then raised to 50 pounds in July 2017, with a maximum of four individuals registered on the smart card (and 25 pounds for each additional person). Despite the pound’s significant devaluation between 2022 and 2024 and its inflationary impact, the allowance has stayed frozen in nominal terms ever since.
Half of beneficiaries qualified for an extra 100 pounds per household for six months between 2022 and 2023, yet many never received it. The government did allocate an additional 400 pounds for 10 million households, to be disbursed in March and April, ahead of Ramadan 2026. These temporary measures failed to offset the continuous erosion of the allowance.
Price hikes within the system eroded the allowance further. The shift to cash came with a sharp rise, starting in 2014, in the prices of rationed goods, with the exception of bread, which stayed stable until 2024. Prices moved much closer to the free market rate, fluctuating with market trends and sometimes even exceeding them. The goal, in line with the IMF’s vision, was to eliminate price distortions.
In 2012, a liter of blended cooking oil cost 3 pounds within the tamween system and 9 pounds on the free market, a 67% discount. By 2022 the system price had risen to 28.75 pounds against 38 pounds on the free market, and the discount had fallen to 24%.
The government did not resume price controls on basic subsidized goods (sugar, oil, and rice) until 2023, to mitigate the effects of the war in Ukraine, which had driven up global food prices. The discount rose to 48%, with a liter of subsidized cooking oil costing 37.5 pounds against about 72 pounds on the free market. Still, that is below the 2012 discount.
Commercializing prices sharply cut the quantities beneficiaries received. In 2012, a four-person household typically obtained about 22 kilograms of food per month. In 2026, the smart card’s cash allowance buys only 8 kilograms. Benefits have more than halved, and it is fair to ask what the ration still achieves. Former Supply Minister Ali Moselhi conceded as much when he said, “The 50 pounds barely covers the price of cooking oil and sugar,” while explaining the removal of rice from the available goods starting in September 2023.
Commodification has now reached subsidized baladi bread, once a red line. Its price rose (though it remains far below the free market price), and, as announced in July 2026, bread subsidies, the only remaining in-kind support, are being converted into cash. Instead of an entitlement to five loaves daily, every citizen will have a cash allowance of 7.5 pounds a day on the smart card, which equals the production cost of five loaves (1.5 pounds per loaf). The system is scheduled for January 2027.
To appease popular discontent, the government insisted the mechanism is exactly the same, with citizens receiving the same quantity of bread. But if bread follows the commodification logic of the tamween system, its price will likely track the trajectory of tamween prices: a gradual rise toward free market prices, then a decline in the quantity available if the cash allowance stays frozen.
Commercializing the system
Since 2022, the IMF has insisted on implementing the State Ownership Policy Document in a drive to privatize public enterprises. Although the policy classifies food security as a strategic sector, pressure is mounting on the Holding Company for Food Industries and its subsidiaries to “establish financial and operational performance indicators, review operational efficiency rates, and maximize economic returns.” The holding company’s future is uncertain, as is the fate of thousands of workers.
Commercialization was imposed on the entire tamween system, even though it differed from the explicit privatization applied in other sectors. A prominent feature was the entry of private-sector products onto the subsidized goods list, which grew to about 30 commodities in 2014.
The reform was supposed to offer beneficiaries freedom of choice, letting them spend their cash allowance on any of these goods as they preferred. But that vision was detached from the tamween system’s reality: the allowance is so meager that citizens can afford only three or four items.
The real beneficiaries were private firms, and above all food companies affiliated with the military, for which the tamween system became a chance to sell in bulk, with modest discounts reflecting the large volumes sold to the Ministry of Supply and Internal Trade.
Together, these changes created a “tamween market”: a network of transactions between suppliers and buyers that operates like an open market, but relies on a captive consumer base with no alternatives. That base is vast, with more than 60 million smart-card beneficiaries.
Military-affiliated companies profit even more from this tamween market because they also receive multiple production subsidies. They benefit from the system at both ends: lower production costs thanks to subsidized inputs, and a guaranteed customer base.
Workers at subsidized bakeries and tamween outlets, on the other hand, lose out under the new system: consumer price hikes are not adequately reflected in their profit margins, and they face intense bureaucratic pressure such as inspection.
Public-sector workers in the food industry are among the hardest hit: those in wheat, rice, and sugarcane mills, edible oil refineries producing for the tamween system, industrial bakeries, and state-owned consumer cooperative retail chains.
These enterprises operate under the Holding Company for Food Industries, an affiliate of the Ministry of Supply and Internal Trade. Commercializing the system put the holding company in direct competition with the private sector while forcing it to maintain price controls on basic food staples. It has offset the pressure by shifting the burden onto its workforce.
Last September, workers at the Beheira Rice Mills Company, a subsidiary of the holding company, accused management of failing to comply with the mandatory minimum wage set by the Ministry of Supply, which was raised to 7,000 pounds in July 2025 and to 8,000 pounds in July 2026. Despite years of service, workers report a net monthly income of around 4,200 pounds. Employees at the state-owned Sugar and Integrated Industries Company likewise complain of low wages and precarious employment, including heavy reliance on uncontracted day labor.
Targeting in order to exclude
Stricter targeting is the third approach through which the IMF indirectly pressures Egypt to dismantle the food subsidy system, alongside cash payments and commercialization. The letters of intent accompanying Egypt’s loan reviews consistently stress the need for the “reduction of untargeted subsidies.”
That wording recurs in documents prepared jointly with IMF experts, which points to the Fund’s explicit directive to end food subsidies in their old form, available to the poor and the middle class alike.
The IMF lays the groundwork by stressing the continuation of Takaful and Karama as the long-term alternative to the existing subsidy system. In its loan agreements it designates the expansion of these cash programs a “structural benchmark,” a prerequisite for completing loan reviews, without which the Fund could withhold remaining loan tranches.
Conditions designed to exclude anyone not living in extreme deprivation from the tamween system began in 2016, when the Ministry of Supply first announced its subsidy eligibility criteria.
Since then, numerous iterations and clarifications for those excluded have circulated in the press, such as annual school tuition above 20,000 pounds, a car from 2018 or later or worth over 1 million pounds, or an electricity bill above 800 pounds a month.
Many citizens have faced arbitrary enforcement of these criteria, compounded by database errors and a lack of clear information. Beneficiaries often discover their exclusion only on arriving at a bakery or tamween outlet, then hit steep hurdles when they appeal. This has raised serious concerns about the government’s targeting plan.
According to circulating data, the current exclusion drive aims to make Takaful and Karama beneficiaries the primary group entitled to food subsidies. That may seem rational on the surface, but it rests on the premise that only the poorest need food assistance, even as economic distress batters a much broader segment of the population.
The most recent reliable poverty estimates show the poor made up 35.7% of Egypt’s population in 2023. Add those hovering near the poverty line and the share approaches half the country, while Takaful and Karama cover fewer than 20% of citizens. Can we really assume that those outside these cash transfers do not need subsidies to secure their food?
The IMF’s vision is narrow. Targeting creates an arbitrary selection process that turns minor distinctions into grounds for exclusion, and it misses the poor who lack the documentation needed for formal registration. By contrast, improving broad living standards through universal social policies for the working and middle classes alike (food security, universal healthcare access, free public transit, social housing, and quality education) keeps working-class families from sliding into extreme poverty at the slightest shock, such as job loss or illness. Preserving universal in-kind support also pushes general price levels down.
The logic behind the current subsidy overhaul appears, then, less about excluding “ineligible” citizens to help the most vulnerable than about a sifting exercise, however arbitrary, meant to shrink the beneficiary rolls and relieve fiscal pressure on the state budget. The means, targeting, becomes an end in itself.
At the close of a decade of subsidy restructuring under IMF auspices, characterized by visions tilted toward commercializing the system and decoupling support from everyday cost-of-living pressures, the authorities show no sign of deviating from this path. Instead, they appear set to continue cutting subsidies, irrespective of whether Egypt’s financing programs conclude.