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Egypt to introduce smart cards to save the money it spends on annual wheat subsidies

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CAIRO - Egypt will try to save half the money it spends on wheat subsidies by issuing a new smart card system to ensure that the cheap bread goes to only the neediest.

Egypt is the world's largest importer of wheat and the country's supply is subject to price changes on the international market. Unrest in Ukraine has pushed up wheat prices worldwide in recent months.

Supply Minister Khaled Hanafy said in an interview this week with The Associated Press that the new cards will help the government prevent citizens from buying in bulk and save roughly 11 billion Egyptian pounds ($1.6 billion), half of what it spends on bread subsidies yearly.

Farmers began harvesting the annual wheat crop this week, and the staple forms the basis for the country's subsidized flat bread — a staple of the Egyptian diet. This year's harvest comes as the country starts to reform its decades-old food subsidy policies with the electronic smart card system. Last month, the government piloted the program in Port Said.

Subsidized bread remains a lifeline for many Egyptians, amid a roughly 10 per cent yearly rate of inflation in food prices. But the subsidy policy has become an increasingly heavy burden on the state budget.

The crop has also become mired in politics due to its importance to Egypt's poorer classes. In 2008, shortages in subsidized bread led to fights that killed eight people. In 1977, an attempt to end such subsidies led to riots that required army intervention.

State-run bakeries sell bread from 5 piasters (0.7 cents) per piece to 50 piasters (7.1 cents). In private owned-bakeries, the cheapest bread is 25 piasters (3.5 cents).

Increasing Egypt's wheat cultivation is an unrealistic expectation, Hanafy said. He said that Egypt will continue to rely on foreign sources.

"I don't believe that we are targeting self-sufficiency with wheat," he told the AP while giving a tour of one of the country's golden wheat fields as it was being harvested. "I don't believe economically that this is a desired objective."

He said Egypt's precious arable land is needed for other crops, and it would be inefficient to use it solely for wheat.

"There is an opportunity cost," he said.

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