Budgeting for social support

Nahla Abul-Ezz, Tuesday 2 May 2023

The government is increasing social security spending in order to provide greater support for Egyptian families, reports Nahla Abul-Ezz


Before parliament began discussing the government’s draft budget for 2023-2024, President Abdel-Fattah Al-Sisi asked for a LE171.3 billion increase in allocations for social security, bringing them up to LE529.7 billion.

The purpose was to ease the strains on people’s living standards resulting from the current global inflationary wave. The 48.8 per cent hike enables the government to expand the social security budget that targets the most vulnerable in a manner that is in line with its drive to improve standards of living among limited-income sectors of the population in rural and urban areas.

According to Minister of Finance Mohamed Maait, LE127.7 billion has been allocated to subsidise foodstuffs in the forthcoming financial year, a 41.9 per cent rise from this year’s figure, and LE119.4 billion to subsidise petroleum products.

The decision regarding petroleum products temporarily reverses the policy of gradually lifting subsidies, and it was clearly imposed by the current economic difficulties.

Petroleum products are basic commodities whose rising prices cause the prices of many other commodities and products to go up. The decision will help to buffer consumers against the effects of fluctuations in international oil prices, which have risen to $86 per barrel and are expected to rise further.

Egyptian families are struggling with rising prices, as inflation rates reached 32.7 per cent in March, their highest in five years. Food inflation reached a new all-time high of 63 per cent in March versus 61.8 per cent in February. Starting on Monday, the Supply Ministry also raised the prices of almost all subsidised commodities sold to ration cardholders. They include cooking oil, rice, sugar and lentils, with increases ranging between 14 and 20 per cent.

The new budget has also earmarked LE202 billion for pensions, up six per cent from the previous allocation, in order to ensure the necessary liquidity to serve pensioners and their dependents and meet the government’s obligations towards them. Another LE8 billion has been earmarked for medical treatment at public expense. The allocation is 14.3 per cent more than in the 2022-2023 budget.

The government is continuing to carry out the presidential Decent Life Initiative, Maait said, a rural development programme, now in its second phase, that aims to improve the lives of people in Egyptian villages. The initiative is an integral part of Egypt’s comprehensive sustainable development drive that seeks to eliminate poverty and ensure a dignified life for the 60 per cent of Egyptians who need support.

In addition to raising the social, economic, and environmental standards of target families, the initiative also aims to create more job opportunities. Maait said the government was taking measures to support the agricultural and manufacturing sectors with this in mind, and LE19.5 billion has been allocated to an initiative to support lower interest rates on credit facilities for the owners of small and medium-sized agricultural and manufacturing enterprises to encourage them to expand production.

Another LE28.1 billion has been allocated to support and stimulate production for export, up 368.3 per cent from last year’s allocation. Maait added that a budgetary reserve of about LE55 billion has been established to facilitate adjustments to changes in the exchange rate, thereby ensuring the execution of the president’s directives related to the drive to stimulate exports.

Abdel-Salam Al-Gabali, chair of the Senate’s Agriculture and Irrigation Committee, stressed that the increased allocations for social security were a concrete reflection of the Egyptian leadership’s determination to ease the burdens on the people due to the repercussions of the global inflationary wave that has precipitated rising commodity prices.

The increased budgetary allocation “makes it possible for the government to expand its social safety net for the neediest families in a manner that integrates with the drive to raise living standards,” Al-Gabali said. “These decisions help to enable lower-income families to weather the repercussions of the current global crisis, which is casting its shadow over all countries, including Egypt.”

Rabeh Ratib, president of the General Association of Tax Legislation, told Al-Ahram Weekly that “Egypt has continued to support its social support and protection programme despite the challenges faced by all countries as a consequence of the succession of global crises from Covid-19 to the Russian-Ukrainian war.”

“It isn’t easy for the government to sustain the programme, and increasing its funding has been extremely difficult given the global crises.”

Ratib said that despite the strains the increased spending puts on the national budget, protecting society and social peace is more important when citizens need to feel that the government is looking out for their welfare and supporting them through wage hikes, subsidies on commodities and fuel, and other measures.

The global economic crisis is not targeting any particular country or countries, he stressed. “The whole world is affected by this crisis, and Egypt’s social support and protection programme is a very good response to it as it helps to offset inflation.”

The new 2023-2024 budget, which covers allocations for national administration, local administration, and public-service organisations, details projected expenses amounting to around LE3 trillion, up 44.4 per cent from the previous year, while total projected revenues come in at LE2.1 trillion.

Tax revenues are expected to come to 31 per cent of total revenues due to the expansion in the taxpayer base and the introduction of automated processes, reflecting the government’s efforts to maximise public resources and better meet the priorities of sustainable development.


A version of this article appears in print in the 4 May, 2023 edition of Al-Ahram Weekly

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