Notes on Egypt’s efforts to combat poverty

Mohamed Shuman
Wednesday 12 Oct 2016

The writer highlights a few steps that can address poverty and help in developing Upper Egypt and other marginalised areas

Egypt, like the rest of the world, has the rich and the poor. Undoubtedly, the decline in poverty rates and the numbers of the poor reflects the progress of efforts to develop and ensure a fair distribution of wealth. However, the relationship between development and fairness is not proportional in all cases and this also goes for the relationship between the revolution and development.

In the Mubarak era, the rate of growth of GDP rose to 5% in 2010, although rich people’s wealth grew and the percentage of poor people increased.

After the two uprisings or revolutions of 2011 and 2013, the GDP rate of growth fell to 2% and the percentage of the poor rose again until it reached 26.3% in the year 2013 due to inherited causes. This was accompanied by political instability, foreign investment decline and much less tourism.

It was President Abdel-Fattah El-Sisi’s fate to face all these problems as well as terrorism in Sinai. The irony lies in that the two revolutions raised the aspirations of Egyptians, while the economic results were not encouraging -- prices rose and unemployment rates increased and it become necessary to go forward in parallel directions.

The most important of these directions is economic and human development and implementing difficult policies – ones that are far away from being populist, especially after reaching a deal with the IMF. This, in turn, will lead to more austerity concerning public expenditure, decreasing subsidies for fuel and electricity and some other commodities and services as well as the devaluation of the Egyptian pound.

Managing these difficult files without causing great harm to the poor or touching the basic services provided to them is the biggest challenge Egypt is facing. According to the Central Agency for Public Mobilisation and Statistics’ (CAPMAS) estimations, the percentage of poor in Egypt increased from 26.3% in 2013 to 27.8% in 2015.

Poverty was concentrated in Upper Egyptian governorates and reached its highest levels in Assiut and Sohag with a percentage of 66%, followed by Qena with 58%, while it was only 18% in Cairo. These poor segments consume less than 4% only of the total national consumption.

Due to this, the president announced an integrated package for supporting the poor, especially in Upper Egypt and the Delta countryside, where the system of subsidising commodities and distributing bread through ration cards for every citizen was renovated and developed.

The “Takaful wa Karama” (Mutual Support and Dignity) programme that was launched in March 2015 aims to reach out to one-and-a-half-million families from a total of four million poor families within a three-year period.

The programme is considered to be the Egyptian version of “Bolsa Familia”, where families with children under school age receive 325 Egyptian pounds, another 60 pounds for having a child in the primary stage, 80 pounds in the preparatory stage and 100 in the secondary stage on condition that the beneficiaries’ children attend school regularly and receive medical care.

The objective is for every poor family to receive between 37 to 49 dollars monthly as a maximum.

The programme succeeded in its first year in covering 506 thousand families with one-billion, one-hundred-and-seventeen-million Egyptian pounds being spent.

The subsidies, grants and social benefits allocations reached 21.2% of this year’s total general budget. Thus, it reflects the government’s keenness to take into account the social aspects of the poor and the poorest communities.

However, some neo-liberals have criticised the increase in these allocations and have argued that it devours the state’s capability for investment. This is a false claim because the subsidies policy is an investment in humans that in turn has an economic and human return. It also constitutes a commitment from the state to realise social justice and human development.

Definitely, the poor or illiterate cannot be punished due to their status and because they have more offspring on average than the educated. About a third of Egyptians are illiterate and it is society’s responsibility before being the state’s responsibility.

It is true that it is necessary to resume and activate family planning programmes because population growth in the years following the revolution increased to 2.4% in a way that may exceed the GDP sometimes.

But it is impossible to decrease the subsidies offered to the poor, especially because there are fears that the percentage of poverty in society will increase if the prices of energy and food rise after the expected pound devaluation. If this happens, it would mean that the official rate of exchange will come close to its rate in the parallel market.

Here, may the reader allow me to present a number of notes that could be of benefit to Egypt’s efforts to address poverty and development in Upper Egypt and other marginalised areas.

First: According to the recent estimations by CAPMAS, poverty percentages relied on results of surveys on income and expenditure, which were conducted throughout 2015 before the pound devaluation in the unofficial market and the price rises.

CAPMAS considers that the minimum income for a decent living is 482 Egyptian pounds (approximately 55 dollars according to the official exchange rate and 38 dollars according to the unofficial rate) per month.

We may note here that the amount is extremely humble, especially considering that most imports are calculated on the unofficial rate. Consequently, the Egyptian poverty line is less than the 1.9 dollars per day which is the poverty line approved by the World Bank.

Moreover, it does not take into account the number of family members and many other elements. The most important of these is the quantity of commodities that could be bought by this amount of money in 2015 has now decreased by more than 30% after the pound devaluation.

Second: The difficult situation for the poor and the harder situation regarding the economy asserts the necessity of rationalising the subsidies policy in a way that really benefits those who actually deserve it. Hence, it is imperative to activate the role of civil society, parties and media in convincing citizens of the importance of the economic reformations and its feasibility for the economy’s future.

In addition, that policy will not be executed at the expense of social justice since there are governmental and societal programmes and initiatives defending the poorest groups in society and that help them to lead a better life.

There are thousands of NGOs and individuals who offer different forms of financial and in-kind support to the poor in the frame of religious or humanitarian activities. Many of these do not get taken into account by the estimations of CAPMAS.

Third: Despite the significant governmental and societal efforts and initiatives, they will remain restricted to containing the poverty problem and the negative social phenomena it causes such as school dropouts, child labour, early marriages and all kinds of crime.

Thus, we have to review the applied taxation system which does not achieve social justice. For the maximum income tax is 22.5% for those whose income exceeds 200 thousand pounds. This means that those whose income reaches 200 million pounds or more pay to the state the same percentage as the citizen whose income is 200 thousand pounds!

Thus, a system of progressive income tax must be applied. It is applied in most advanced capitalist and developing countries.

We must take into account that decreasing taxes hasn’t encouraged foreign investment in the last ten years because there are other factors that attract investment – and the tax price is not among the important ones.

On the other hand, decreasing the taxes that the rich pay, as one of the top industry magnates in Egypt asserted to me, led to wealth monopoly and its concentration in the fields of real estate and land acquisition, in addition to the emergence of provocative consumerist patterns inconsistent with the economy’s difficult situation.  

I point out here the limited contribution of Egypt’s businessmen and the wealthy to the Support Egypt Fund, which the president was counting on in launching gigantic development projects.

In brief, my message is that the state’s effort as well as those of civil society’s and philanthropists’, which aim to protect the poor and improve their living conditions, will neither solve the problem nor enable Egypt to totally eradicate poverty by the year 2030 as it was envisioned in the state’s Sustainable Development Strategy (SDS).

This will not materialise except through imposing progressive income tax and launching more small developmental projects which are based on educating and training the poor and offering them small loans to start up small and medium projects that, through the government’s support, will be marketed and exported.

Finally, the state must increase the incentives concerning redistributing developmental projects where the top priority should be given to Upper Egypt and desert areas.

I conclude the article with a bright spot regarding the state’s SDS 2030 plan concerning ten Upper Egyptian governorates. About 12 billion dollars have been allocated to these governorates, of which 3.9 billion dollars is meant for those of Qena and Sohag in the period between fiscal years of 2016 and 2020.  

The writer is dean of the Faculty of Communication and Mass Media at the British University in Egypt (BUE).



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