Egypt: Putting the people first

Niveen Wahish , Saturday 23 Sep 2023

With the country’s economic challenges continuing unabated, new measures were announced this week to give greater financial support to people across Egypt.

Al-Sisi

 

Earlier this week, President Abdel-Fattah Al-Sisi announced a set of exceptional measures aimed at giving additional financial support to people across the country.

“I fully appreciate the extent of the suffering of Egyptian families in the face of the burdens resulting from the negative economic effects of the complex global crisis [caused] by the coronavirus pandemic and compounded by the Russia-Ukraine war,” the president said while inaugurating development projects in Beni Sweif governorate via video conference as part of the Decent Life initiative.

This is not the first time that the president has spoken frankly about the economic situation the country is facing. He did so last year during the Economic Conference organised to review economic policy, said Mohamed Farid, deputy chairman of the Committee on Human Rights and Social Solidarity in the Senate, the upper house of Egypt’s parliament.  

However, in Beni Sweif, Al-Sisi spoke of how the situation has become more challenging. It was for this reason that the president had issued the decision regarding increased financial support, Farid told Al-Ahram Weekly.

“Transparency is important. The first step towards finding a solution is to admit there is a problem,” he said.

This is the third package of economic assistance passed since the war in Ukraine began in early 2022, and it is part of government efforts to dampen the effects of the resulting economic situation on the population, Farid noted.

Costing some LE60 billion, the measures include doubling the exceptional cost of living allowance for all state employees to LE600 and raising the minimum wage for public-sector employees from LE3,500 to LE4,000.

The president also raised the annual income-tax exemption threshold by 25 per cent to LE45,000. He raised benefits for five million families benefiting from the Takaful and Karama welfare programmes by 15 per cent and doubled the exceptional grant for 11 million pensioners and other beneficiaries to LE600.

The additional support is aimed at helping families meet their basic needs amid skyrocketing inflation.

Financial analyst and economist at HC Securities Heba Monir anticipated in a note that Egypt’s monthly inflation would continue to rise by 1.8 per cent and accelerate to 37.8 per cent on an annual basis in September, “reflecting supply shortages of basic commodities and products mainly caused by the curbing of imports and the lack of dollar availability and the seasonality effect of the start of the academic year,” she said.

Egypt’s annual headline inflation accelerated to a record of 37.4 per cent in August from its previous record of 36.4 per cent year-on-year in July, according to the Central Agency for Public Mobilisation and Statistics (CAPMAS).

The announced measures could be a step ahead of what many believe will be more hard-to-avoid policies that will affect prices and incomes.

But when such actions will take place or in what sequence remains unknown, said political analyst Gamal Abdel-Gawad. He said that although the president had spoken earlier about the economic crisis, this time around he was more candid and more specific about explaining the situation.

“This is an indicator that we will see a different way of tackling challenges in the coming period,” Abdel-Gawad said.

Admitting the situation and presenting it to the public without any sugar-coating while announcing the measures is a good sign of proactive policies, he added.

Amira, the mother of three and a government employee, was thrilled to learn that she was going to get a little extra money, though she knew it would not go far in the face of rising prices. But she was worried that the step could suggest another devaluation was about to happen.

Allowing the pound to float freely is one of the steps the government has agreed upon as part of its $3 billion agreement with the International Monetary Fund (IMF). In June, President Al-Sisi had ruled out a further devaluation if it would affect citizens adversely, but the delay has been affecting the progress of the IMF agreement.

To date, neither the first nor the second review of the loan agreement, scheduled in March and September, has taken place.

While the timing is not clear, another devaluation is bound to happen, Farid said. There is around a 30 per cent difference between the official price of the dollar and its price on the parallel market, he noted.

However, any devaluation will need reserves to support the market and avoid the initial shock, he said. The government is counting on revenues from the sale of stakes in state-owned companies and on attracting investments to provide it with the needed resources.

An updated copy of the State Ownership Policy Document released in late August said that Egypt has netted $5 billion in privatisation receipts since February 2022. This includes last year’s deals that saw the Saudi Public Investment Fund and the Abu Dhabi Wealth Fund ADQ between them buying $3.1 billion of stakes in Egyptian companies Abu Qir Fertilisers, MOPCO, and E-Finance.

This is in addition to this year’s $1.9 worth of deals announced by Prime Minister Mustafa Madbouli and covers the sale of stakes in seven historic hotels to the Talaat Moustafa Group, Ezz Al-Dekheila to Ezz Steel, and stakes in the Egyptian Ethylene and Derivatives Company, Egyptian Linear Alkyl Benzene, and Egyptian Drilling to ADQ.

The document included a list of companies that are expected to be put on the bloc soon, among them a Siemens-built power plant in Beni Sweif, several desalination stations, and military-owned bottled water company Safi and petrol-station operator Wataniya.

According to Farid, the challenges facing the economy will take time to resolve. The government has already taken some corrective measures, such as launching the sale of stakes in state-owned companies. It is also working on improving the investment climate by allowing a golden license system that will enable hassle-free permits in certain strategic projects.

However, more needs to be done regarding facilitating the licensing process for projects, revising fees, and enabling the import of production inputs, Farid stressed. “It’s understandable that imports are slow, because the government needs the hard currency to meet the basic needs of the people first,” he noted.

During his speech, the president said the government was directing large sums of hard currency to importing wheat to ensure stable bread supplies.

He also said the state was spending billions of dollars more to import the oil needed to produce electricity. The price of a barrel of diesel needed for Egypt’s electricity plants has jumped from $65 to $70 to $90, he said.

His comments clarify why people are continuing to experience power cuts despite promises that they would end in September. There have been scheduled daily power cuts since July that many were hoping would be over with the end of summer. But in some areas the power cuts have been extended to longer hours.

According to Abdel-Gawad, the president’s speech was qualitatively different from earlier ones. “With the approaching elections, the president is seeking the trust of the people,” he said.

The upcoming elections, expected in a few months, are important because they will show that the country is stable and has the institutions needed to run major elections. The outcome will also indicate ongoing stability, which is needed to attract investment, Farid concluded.


* A version of this article appears in print in the 21 September, 2023 edition of Al-Ahram Weekly

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