Increased cash support for subsidy cardholders is not enough: expert

Hisham Salah
3 Min Read
The latest inflation report issued by the Central Agency for Public Agency for Public Mobilization and Statistics (CAPMAS), on 10 October, indicated that Egyptian core inflation surged by 1.7% in September, compared to 0.14% in August. (AFP File Photo)

Egypt floated its currency on Thursday, allowing it to fall from its previous peg of EGP 8.88 to the US dollar to between EGP 13 and EGP 16. This is the final push to secure the three-year International Monetary Fund (IMF) programme within days.

In another step toward securing $12bn from the IMF, the government later announced 30-47% increases in fuel prices, adding to the shock on the street as people saw their salaries drop and costs soar in the space of a day.

To reduce the impact of these tough decisions, the government announced that the cash support for subsidy cardholders would be increased to EGP 21 instead of EGP 18 monthly.

Abou Bakr Emam, head of the research department at Prime Bank Limited, thinks that this small increase is a poor effort.

He said that this cash support the government implemented would barely cover the rise in the price of sugar, not to mention the inflation that has pushed up prices of nearly every single product.

He believes that EGP 21 for a person is not enough for much of anything. Subsidising commodities for low-income citizens must end and be replaced by cash support, which is what the government is actually doing now but in very slow steps.

Emam added that the government must revise its ways of supporting low-income citizens, by providing for those who actually need support instead of subsidising those who don’t.

According to the state’s general budget, subsidising food commodities and bread costs the government EGP 46bn—almost 69 million citizens benefit from this.

Emam believes that the number of people not deserving of subsidies is higher than the actual number of people who need support, adding that providing for those who are truly in need would save a huge amount of money.

The government must increase the minimum wage for both the public and private sectors, Emam said.

He explained that the minimum wage of EGP 1,200 is barely enough to live on, even if citizens choose the cheapest forms of transportation and food.

The minimum wage must be no less than EGP 2,000 for any employee, Emam said. He added that the lowest wage for a good standard of living is EGP 3,000 per person.

While he realises that this is a hard thing to achieve, he emphasised that the government must hold talks with the private sector to reach a fair wage.

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