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By Ulf Laessing
CAIRO, July 16 (Reuters) - The man who will run Egypt's Supply Ministry, managing subsidised fuel and bread that eat up a quarter of the state budget, is a policeman who has spent a career fighting rampant theft and corruption in that system.
Mohamed Abu Shadi, a 62-year-old police general, was for several years the senior Interior Ministry official responsible for investigating crime in the supply network. He was sworn in on Tuesday in the interim government that is to run Egypt following the army's overthrow of President Mohamed Mursi.
Analysts said Abu Shadi's appointment signalled a desire to clamp down on losses as Egypt seeks to plug a budget deficit that has ballooned since Hosni Mubarak was ousted in 2011.
"I see it as a signal of a very strong state," said John Sfakianakis, chief investment strategist at MASIC, a Saudi-based investment firm. "They want to stop leakages in the supply system."
Designed to keep food and petrol prices stable - a sensitive issue in the most populous Arab nation of 84 million - the state scheme is notorious for being abused and has become ever more expensive as the population grows and world prices increase.
Trucks carrying subsidised diesel often "disappear" after leaving state fuel depots. The same goes for bread, with bakers selling subsidised products to farmers, who find it cheaper to give to their livestock than animal feed.
Fuel subsidies cost the state over 90 billion pounds ($13 billion) annually. Bread subsidies are set to reach a record high of 16.2 billion pounds in the 2012/13 financial year.
Egypt is the world's biggest importer of wheat and also buys fuel to distribute to the population at below-market prices.
Anger at irregular supplies of fuel were a factor in mass protests which prompted the army to push Mursi aside. Though many economists say Egypt must reduce subsidies if its economy is to flourish, any such move will be deeply unpopular.
Abu Shadi will replace Bassem Ouda of Mursi's Muslim Brotherhood, who made limited progress in his battles against corruption during the year Islamists were in power.
Abu Shadi had given up a post in the Supply Ministry last year. Born in Cairo, he graduated in economics before making his way up the ranks of the police. He built a reputation fighting racketeers and subsidy cheats - though the state of the supply system shows that his efforts had only limited success.
Sfakianakis said his background would to help him clamp down on corrupt police officers turning a blind eye to illegal petrol sales and enforce tough but necessary reforms as the government seeks to introduce austerity measures to steady a shaky economy.
"A police general can maybe stop the leakages," he said. ($1 = 7.0028 Egyptian pounds) (Additional reporting by Patrick Werr; Editing by Mike Collett-White and Alastair Macdonald)