The Impact of Forced Deliveries on Egyptian Agriculture

Abstract

The consequences of terminating the current system of forced deliveries of rice for domestic subsidized consumption in Egypt are analyzed with farm‐level data. Under the conditions prevailing in 1979–81, impact on the marketed surplus would have been negligible due to the existence of free sales beyond quota. Producers would benefit marginally from liberalization, and part of the cost of consumer subsidies would be shifted to the government. The key source of financing consumer subsidies is the defense of rice exports and the continued price wedge between domestic and world prices, not the enforcement of deliveries for domestic consumption.

Food subsidies in developing countries: costs, benefits, and policy options

“…In the consideration of the distribution of the benefits of food subsidies, the distribution of the costs has rarely, if ever, been adequately captured. Certainly, transfers from producers to consumers have been recognized and estimated (de Janvry, Siam, and Gad, 1983;von Braun and de Haen, 1983;Bale and Lutz, 1979;and Scandizzo and Bruce, 1980), confirming that subsidies and associated distortions to producer prices set up an extremely complex pattern of taxation transfers between various groups.…”

“…But the incentive to avoid the tax will still exist, and farmers will seek untaxed alternatives. With forced deliveries, the cost of the food subsidy is shifted from the government to the farmer (de Janvry, Siam, and Gad, 1983). Although the short-run loss in efficiency may be minimal, regressive transfers from low-income rural households to middle-income urban households can result.…”

“…However, the gain to consumers has come at the cost of an implicit tax on rice producers. Between 1976 and 1981, about 80 percent of the total consumer benefits of cheap rice came from the tax on rice producers (de Janvry, Siam, and Gad, 1983). This tax depressed domestic output, and diversion to the local market reduced exports.…”