2019: Egypt's economic reform programme- Fruit yet to be reaped

Mona El-Fiqi , Friday 27 Dec 2019

The government has been aiming to contain the social costs of the economic reform programme it embarked on three years ago throughout 2019

social protection
The social protection schemes introduced by the government helped ease the burden of the reform programme (photo: Reuters)

While economic indicators like the growth rate, the unemployment rate, and the inflation rate have all shown significant improvements over the past year, many Egyptians have not yet been enjoying real improvements in their standard of living. 

As 2019 witnessed the introduction of another phase of energy subsidy cuts, the high prices of services and commodities have been making the lives of many harder. 

The government introduced many initiatives during the year to offer subsidised food items to make things easier on households, a move that also helped to lower the inflation rate to around three per cent in October, its lowest level in 14 years. It also supported a number of social-protection programmes, while establishing an accurate database to determine their real beneficiaries.  

However, people living in poverty rose to 32.5 per cent of Egypt’s total population in 2018, compared to 27.8 in 2015, according to the state-owned Central Agency for Public Mobilisation and Statistics (CAPMAS).

The poverty line is defined as the minimum income thought adequate for an individual to meet his basic needs. The latest survey conducted by CAPMAS on income, expenditure and consumption stated that an individual who earns less than LE8,820 annually or $1.3 a day lives under the poverty line in Egypt. 

According to CAPMAS, the poverty line in Egypt also varies from one area to another depending on the cost of living in each. The highest rate of poverty was recorded in Upper Egypt, mainly in Assiut and Sohag, with 66.7 per cent and 59.6 per cent of the population, respectively. In 46 villages in these two governorates the poverty rate ranges between 80 to 100 per cent.

Experts say the austerity measures taken by the government during the past few years have increased poverty rates. However, they could have been higher had it not been for the social-protection schemes the government has been adopting, according to Minister of Planning Hala Al-Said. 

To help lower the poverty rate the government has been applying programmes to improve the living standards of underprivileged people. “Decent Life”, a national initiative launched by President Abdel-Fattah Al-Sisi in January 2019, aims to provide better living conditions for the needy, for example.

The president has directed the government in cooperation with civil-society organisations to implement the initiative to help improve services provided to those most in need, especially in Egypt’s villages.

The cost of the initiative is estimated at LE2 billion and is partially funded by the Ministry of Finance and partly through 14 NGOs. It is targeting the most underprivileged sectors and individuals in Egypt’s remote areas.

The services provided range from providing decent housing to supplying water and sewage networks. It also provides health services and equipment for the handicapped. It helps poor brides entering marriage and provides job opportunities through micro-projects.

Around 100 of the poorest villages concentrated in Giza, Minya, Assiut, Sohag, Qena, Luxor, Aswan, the New Valley, Qalioubiya, Beheira, Marsa Matrouh and North Sinai have been selected for the initiative. They have a poverty rate of 70 per cent of the population or more.

Such new initiatives complement the existing conditional cash-transfer programmes called Takaful wa Karama (Solidarity and Dignity). These are social-security programmes launched in 2015 and funded by the World Bank. 

Takaful is a conditional family income-support programme through which poor households receive a monthly cash transfer of LE325 provided they claim healthcare by making four visits per year to health clinics by mothers and children below the age of six and attending nutrition-awareness sessions. 

Karama is for elderly citizens above 65 years in age or those with severe disabilities. These vulnerable citizens receive a monthly pension of LE450 with no conditions. 

According to figures from the Social Solidarity Ministry, the total beneficiaries of the first phase of Takaful and Karama have reached 2.2 million families, serving 9.4 million individuals or approximately 10 per cent of Egypt’s population in 2018.

In September 2019, it was announced that 300,000 new families had been added to the Takaful and Karama programmes. Moreover, President Al-Sisi decided to add 100,000 new families nationwide, with around 85 per cent selected from Upper Egypt.

Also in September, the government signed an agreement with the World Bank to finance the second phase of the programmes with a further $500 million. While the first phase of the programmes covered about two million families, or about 9.4 million citizens, the second phase is expected to reach 22.3 million.

Based on this additional funding, the programmes will strengthen the social safety net for a further three years and expand the geographical scope.

In March 2019, President Al-Sisi announced raises in the minimum wage of public-sector employees from LE1,200 to LE2,000 per month and increasing pensions by 15 per cent to a minimum of LE150. The increases aim to ensure that more people are reaping the benefits of the development the country is witnessing.

The year also saw debate on the ration-card system, with food subsidies being a major component of Egypt’s social safety net. For years, subsidised food items have been provided to millions through the ration-card system, and the government has taken steps to rationalise its database in a bid to ensure that the subsidies reach the targeted beneficiaries.

The ration-cards programme currently provides free food to a value of LE50 for each cardholder per month, in addition to five loaves of bread a day for each person.

In 2019, the government continued the rationalisation process that started in 2017 when the Ministry of Supply and Internal Trade began to update the database in order to improve the targeting of low-income citizens. 

The process aims at excluding people registered in the ration-card system but not eligible for financial support. The number of ration-card beneficiaries in March 2019 was down to 63.6 million people, compared to 67.8 million in March 2018, according to CAPMAS.

The high number of those removed from the system was one of the reasons that observers cite as a trigger for the limited protests that took place in September. President Al-Sisi tweeted that he understood the negative impact of the subsidy cuts on some people, and two days later 1.8 million people previously removed from the food subsidy system were returned to it. 

Meanwhile, the process removed the names of dead people and those who had moved abroad and eliminated repeated names. The revision has continued in many phases, but those who have been excluded are still able to access subsidised bread. 

The criteria for removing individuals from the system include families with children enrolled in an international school costing more than LE30,000 per year, those whose electricity consumption is over 650 KW per month, individuals who own cars produced after 2014, individuals whose mobile phone bills exceed LE800 per month, and those owning 10 feddans or more of agricultural land.

At the same time, the minister of supply and internal trade has decided to issue 400,000 new ration cards for poorer families. The ministry has continued to receive appeals from citizens who have been excluded from the system, and anyone who is proven to be eligible for the subsidies will be re-added.

The budget allocated for commodities subsidies in 2019-20 was raised to reach LE89 billion, of which LE38 billion was for food items and LE51 billion for subsidised bread.

The current number of ration cards is 20 million, serving around 63.6 million beneficiaries of food items, while 72 million people are registered in the system for subsidised bread.

*A version of this article appears in print in the 26 December, 2019 edition of Al-Ahram Weekly under the title: Fruit yet to be reaped

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