To help people cope with the rising cost of living, President Abdel-Fattah Al-Sisi this week announced a new economic relief package aimed at putting more cash in their pockets.
The programme will cost the government an estimated LE150 billion and be funded from general reserves in the national budget estimated at around LE300 billion. It aims to increase people’s purchasing power, battered by devaluations of the pound since last year and spikes in inflation approaching 26 per cent in January, the highest rate in five years.
In order to combat inflation, the government would normally aim to take liquidity out of the economy, and the banks have played their part in this by issuing savings certificates offering interest rates of up to 25 per cent.
However, the spectre of stagnation due to rising prices and lower spending has necessitated wage hikes for public-sector employees, the segment of the work force with the largest collective purchasing power.
The new economic relief package calls for a hike in the minimum wage for public-sector employees, bringing it up to LE3,500 a month. This is nearly three times the hike introduced in January 2014, which set the minimum wage at LE1,200. Since then, it has increased to LE2,000 in 2019 and LE2,700 in 2022.
The latest raise will go into effect on 1 April. Normally such raises occur in July, but it was felt that the current economic straits warranted bringing it forward. “The raise could not be more timely, especially with Ramadan less than two weeks away,” said Nahed, the mother of three children in Cairo.
The measures, introduced in accordance with the president’s directives, are part of government efforts to contain the impacts of the global inflationary wave and reduce its impact on the population, Minister of Finance Mohamed Maait said following the announcement of the package.
He explained that the salaries of all civil servants and employees in state-owned enterprises would go up by a minimum of LE1,000, bringing the lowest salary grade up to LE3,500 and higher grades reserved to the holders of Masters and doctoral degrees to up to LE6,000 and LE7,000, respectively.
He added that the total wage increases would cost the state an estimated LE14 billion.
Alia Al-Mahdi, a professor of economics at Cairo University, said that while the wage hikes are important they are not the ideal solution to remedying the present economic problems. The purpose of the high-interest bank certificates was to absorb liquidity and thereby curb inflation, but the newly introduced wage and pension hikes reinject liquidity into the economy, she commented.
The package also includes an increase of LE440 to LE475 to the professional bonus payments awarded to medical practitioners, bringing them up to LE1,000 to LE1,700. Extra incentives offered to doctors and nurses working night shifts and in emergency rooms will also double. Teachers in public schools and universities will receive hikes to their professional bonuses.
Another measure targets the beneficiaries of the Takaful and Karama social-support programmes, who will receive a 25 per cent rise in cash payments starting on 1 April. This increase will cost the state an estimated LE6.5 billion, Maait said. An estimated LE55 billion will also be earmarked to cover state pension payouts, which will rise by 15 per cent as of 1 April, or by a minimum of LE170 to a maximum of LE1,635 a month.
The pensions hike will benefit around 11 million people, according to Gamal Awad, chairman of the National Authority for Social Insurance. He said that bringing the hike forward to 1 April would cost around LE14 billion.
MP Mustafa Salem, deputy chair of parliament’s Planning and Budget Committee, said the new package of relief measures would benefit five million public-sector employees, 10 million pensioners, and five million families who benefit from the Takaful and Karama programmes.
While the news of the raises has been welcomed by many government employees, some have said that they are not enough. “The salary increases won’t improve purchasing power because they don’t keep up with the huge increases in prices,” said Ragaa, a housewife in her 50s.
Farah, a woman in her 20s, said that “the extra LE1,000 will go towards buying some important necessities, but it won’t do much more.”
An elderly man on a retirement pension agreed. The rise in his pension will only enable him to buy more of his basic needs, that is “if prices don’t go up again,” he commented.
* A version of this article appears in print in the 9 March, 2023 edition of Al-Ahram Weekly