The Libyan Industry Union (LIU) announced today that, following a joint meeting with the Ministry of Economy and Trade, the Central Bank of Libya, and several flour mills, an agreement has been reached to set a maximum selling price of 280 dinars per qintar (100 kg) for flour sold to bakeries.
The LIU said eight mills have begun implementing this agreement as of today.
The LIU said this agreement is part of joint efforts aimed at supporting market stability, ensuring the availability of flour to bakeries at fair prices, and helping to maintain stable prices for bread and essential products for citizens.
It affirmed its continued coordination with the Ministry of Economy and Trade, the Central Bank of Libya, and local producers to expand the scope of this initiative. It also aims to work on regulating the prices of other essential goods and products in the coming period, thereby supporting general price stability and enhancing food security in the country.
The LIU called upon all factories and producers to join these national efforts to achieve a balance between production sustainability and consumer protection.
National Initiative for Stabilizing and Supporting the Bread Industry
It will be recalled that the Undersecretary of the Ministry of Industry and Minerals, Mustafa Al-Samou, signed a Memorandum of Understanding (MoU) yesterday with the Acting Minister of Local Government, Mohamed Bin Ghalboun to implement the National Initiative for Stabilizing and Supporting the Bread Industry and is based on the outcomes of the Economic Policy Committee meetings.
To regulate and develop approximately 1,876 nationwide bakeries
The initiative aims to regulate and develop approximately 1,876 bakeries distributed across various regions and municipalities.
It seeks to achieve this by linking flour quota allocations to the bakeries' actual production, thereby curbing the diversion of flour, fuel, and financial allocations, and ensuring that government subsidies reach the intended beneficiaries directly.
Launch of integrated electronic and field-based monitoring and oversight system
The MoU also stipulates the launch of an integrated electronic and field-based monitoring and oversight system. This system will operate through coordination between municipal Industry and Minerals offices, the Municipal Guard, the Bakers' Syndicate, and other relevant entities to ensure compliance with quality standards and proper weight specifications, as well as to guarantee stable bread supplies for citizens.
This step is part of a package of measures being taken by the Ministry of Industry and Minerals, in cooperation with government institutions, to regulate the food industry sector, enhance national food security, and alleviate the daily cost-of-living burden on citizens.
Why are privately-owned mills agreeing to a price ceiling?
The reason why privately-owned flour mills are so compliant to the setting of a price ceiling for bread flour by the government is two-fold.
Firstly, bakeries are their biggest customers. Secondly, and more importantly, the flour mills rely on the state opening letters of credit for them at the preferential official exchange rate in the millions of dollars/euros to import their grains.
Without letters of credit, the mills will be much less profitable. Therefore, the unsaid quid pro quo, it seems, is that if flour mills wish the government to continue to approve letters of credit for them, they must cooperate regarding controlling the highly politically sensitive bread prices.
This summer’s bread crisis
It will be noted that the bread bakeries initiative and the setting of a maximum price for bread flour are well overdue measures and comes on the back of this summer’s bread crisis.
Many smaller companies vie for letters of credit and fail to obtain the facility. There is the perception that there is a ''cosy'' relationship between the government and big business. The public is demanding these companies give back to the public good in return for obtaining cheaper oil dollars.
Bread crises are a regular phenomenon in Libya because of an inflexible state subsidy supply and logistics system and mismanagement. Bread is subsidised on multiple levels in Libya through subsidised flour, diesel and electricity.
However, whenever there is a crisis in supply of any of the above, bread prices or supplies are affected.
This summer Libya has gone through an acute power cut and blackouts crisis which had a knock-on effect on the supply and price of diesel – the fuel used most by bakeries to operate their ovens.
This forced some bakeries to reduce the weight of a baguette, increase its price or close their bakery saying they cannot operate at the set prices.
Corruption surrounding subsidies
It must be noted that subsidies inherently attract corruption in Libya across all sectors. This includes the diversion of subsidised flour to patisseries, pizza-makers etc, and the diversion of subsidised diesel to the black-market where it can be sold at tens of multiples – without having to bake a single baguette.