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Wheat imports by 's private sector have overtaken those by the state commodities authority, a trend that could continue as the government looks to reform subsidies and trim its import bill, industry experts say.

Egypt's private sector imported 6.9 million tonnes of in 2021, up 11% from 2020, while the state-run General Authority for Supply Commodities (GASC) imported 4.7 million tonnes, a 32% drop from the previous year, according to data from the UNÌýFood and Agriculture Organisation (FAO) and two Middle Eastern traders.

Egypt is typically the world's biggest wheat importer. GASC increased imports in 2020 to boost reserves during the pandemic, before reducing them last year as wheat prices surged following export restrictions by Russia. Tensions between Russia and Ukraine, both major exporters to Egypt, continue to put upward pressure on prices.

As wheat prices strain the state budget, Egypt is studying an overhaulÌýfood subsidy programme that provides bread to nearly two-thirds of the population.

Bread subsidies cost the government about $3.2 billion, or around 2% of the 2021/2022 budget, with higher wheat prices expected to add $763 million this fiscal year, according to finance ministry data.

"If GASC wheat purchases decline in the next years as expected due to potential reforms in the subsidy system, a sector of the consumers of the subsidised bread will turn to the free market bread," said Nasredin HagElamin, FAO representative in Egypt.

Under the existing subsidy programme, more than 60 million Egyptians get five loaves of round bread daily for 50 cents a month. Reforming the subsidy - which could entail lifting the price, switching to cash subsidies or targeting it at fewer people - would reduce demand and cut the amount of wheat GASC would need to import each year. Reforming the subsidy is sensitive though as previous attempts to do so have sparked riots.

Wheat imports by the private sector, in contrast, have been rising on the back of population growth and increasing demand for flour, especially for making pasta and other baked goods, and that is set to continue, HagElamin said.

Annual imports by the private sector are expected to increase by 5-7% per year, he said.

The government has already tried to restrict eligibility for subsidised bread as Egypt's population has grown, and shrank the weight of a subsidised loaf by 20 grams in 2020, a move traders say led to the drop in GASC's imports last year.

"The private sector will have a bigger role than GASC in the near future. This is the direction that the government is taking with the reforms," said Hesham Soliman, president of Mediterranean Star for Trading, a Cairo-based grains trading company.Ìý

(Reuters)