The meetings are taking place at a time when geopolitical unrest is complicating the economic scene and making it harder for Egyptians to adapt to inflationary pressures. 

Though the government is under pressure to meet its commitments to the IMF, it is deeply interested in cushioning the effect on Egyptians as much as possible as evidenced by the statements of its top executive and in social support schemes.

The state’s priority is to alleviate the pressure on citizens, particularly by combating inflation and price hikes, while simultaneously continuing efforts to attract investments and empower the private sector to increase employment and stimulate growth, President Al-Sisi said during a meeting in Cairo with IMF Managing Director Kristalina Georgieva on Sunday. 

In late October, Al-Sisi had said Egypt may “review the situation [of its loan programme]” with the IMF if it means placing unbearable pressures on the public. The fourth review of Egypt’s reform programme was scheduled to start on Tuesday. 

During a press conference on Sunday, Georgieva recognised the efforts to bring the economy back on track despite the regional turmoil. She too reiterated that it was important to look into ways to ensure that inflation resumes its downward trend.

Since the government signed its augmented $8 billion loan deal with the IMF earlier this year, it devalued the currency by 40 per cent and introduced two increases in electricity tariffs, one in June and another in September. This is in addition to two major increases in the prices of all kinds of fuel and a double-digit surge in Metro price tickets. It also opted to adopt its first hike in decades in the price of subsidised bread.

Inflation reversed its downward trend to show increases in the last two months to settle at 26.4 per cent in September and is expected to record another increase in October. In addition to offering a social spending package in March, the government said in August it is preparing for Egypt’s largest-ever social protection programme. The March LE 180 billion social support scheme included a 50 per cent hike in the public-sector minimum wage to LE6000, income tax breaks, and pension increases. 

Despite the tough economic situation the government is also determined to continue with its social support scheme Decent Life, president Al-Sisi said in mid-October. The large-scale poverty reduction initiative was designed to be carried out over three phases, each covering 1,500 villages and 40,000 outlying hamlets, costing LE600 billion. The first phase took about three years and ended up costing over LE400 billion, double the planned sum. The second phase is to kick off soon.

In July, Egypt’s Minister of Social Solidarity Maya Morsy announced the expansion of the “Takaful and Karama” cash transfer programme to include an additional 73,000 families. This expansion brings the total number of beneficiaries to approximately 21 million citizens, representing 5.2 million families.

The sustainability of such social support schemes might be questioned in the light of heightened geopolitical risks and their effect on Suez Canal revenues and Egypt’s energy imports. However, analysts see a potential upside in a more favourable global inflation climate leading to cuts in international interest rates and giving Egypt room to follow suit. If this happens it will drive up economic growth and company profits, attracting more investments and creating job opportunities and so weighing down on inflation. 

* A version of this article appears in print in the 7 November, 2024 edition of Al-Ahram Weekly