Radical changes to state policies to increase access to commodities and services have taken place over the past decade to halt the waste of subsidies on social groups that do not need them. In the past, fuel subsidies, for example, were mainly used by high-income strata that were not in need of subsidies.
Law 137/2010 was issued to develop monetary support for poorer individuals and families. The law defined the poor as those unable to provide the basic needs for survival and a dignified life. Poverty is measured according to family incomes, education levels, job availability, housing, and social conditions, such as the number of orphans.
The Ministry of Social Solidarity expanded the definition of subsidies to include financial support for individuals to help them face emergencies, such as the cost of funerals and giving birth at hospitals, paying for expenses such as education, and improving housing conditions, in addition to cash to improve the work capacity of the poor.
The introduction of cash-subsidies programmes Takaful and Karama was one of the successes that successive governments have boasted of since 2014.
The state designed the Takaful (Solidarity) cash-support programme for poor families with children in school. The programme gives LE425 a month to the family in addition to LE60 for each child in primary school, LE80 for a child in preparatory school, and LE100 for a child in high school, provided the family has a maximum of two children in school and they receive education and healthcare regularly.
The Karama (Dignity) programme targets the elderly, people with special needs, widows, and divorced women. The programme grants subscribers LE450 per month.
The two programmes were launched in the 2014-15 state budget targeting 500,000 families in 19 village centres where poverty rates reach 70 per cent of inhabitants. By December 2016, those benefiting from the programmes had reached 1.1 million families and 82,000 people, respectively, in 27 governorates, 227 village centres, and 3,800 villages. The figure jumped to two million families one year later.
According to the latest data released by the Ministry of Social Solidarity, the number of beneficiaries of the two programmes is now 3.6 million families, or 15.3 million individuals.
Some LE19 billion has been allocated to the social solidarity cash programmes this financial year, up by LE0.5 billion on the previous year.
According to a study by Dina Armanios, a professor of statistics at the Faculty of Economics and Political Science in Cairo, the programmes have helped to improve the living conditions of the people who receive them. About 10 per cent of Takaful beneficiaries have moved from extreme poverty closer to the poverty line and 37 per cent have moved above the poverty line.
The results of the latest income, spending, and consumption research conducted by the Central Agency for Public Mobilisation and Statistics (CAPMAS) revealed that 87 per cent of the beneficiaries of the Takaful and Karama programmes were the poorest 40 per cent of the population, which “reflects the success of the state’s efforts” to target the most vulnerable groups.
Hania Al-Shalakami, one of the designers of the conditional cash-support programmes and a research professor at the Social Research Centre at the American University in Cairo, said that changing subsidy policies had been critical to correcting previous mistakes when subsidies had negatively impacted services.
Despite the increased spending on subsidies, poverty and unemployment rates had been rising and the quality of services and goods declining, she said.
She said that the goal of implementing conditional cash-support programmes such as Takaful and Karama was not to maintain their current forms and increase the number of beneficiaries on an annual basis, but rather to give the government and decision-makers the ability to innovate with regard to social policies and measure the extent of improvements in the lives and health of beneficiaries.
The programmes should target particular sectors, such as farmers and fishermen, to generate more job opportunities, she added. They should also focus on the poor and design special policies for them to prevent more groups from sinking below the poverty line.
SMART FOOD SUBSIDIES: The government also revamped the food-subsidies system, distributing smart cards to people deserving of subsidies with which individuals can receive up to five loaves of bread daily, as opposed to the previous system in which people bought any number of subsidised loaves.
If an individual does not receive their full quota of bread, extra points are added to their smart card by which they can buy commodities equivalent in price from ration outlets. This system is called “bread points”.
The restructuring process has included allocating cash to ration-card holders to buy goods from ration outlets or any markets. Following the floatation of the pound in November 2016, the government increased an individual’s share of cash in food subsidies from LE15 to LE25 and then again in 2017-18 to LE50.
Subsidies on food commodities accounted for the largest share of the state’s spending on subsidies in 2019-20, recording LE89 billion, or 51.8 per cent of the total budget for subsidies.
Alia Al-Mahdi, a former dean of the Faculty of Economics and Political Science in Cairo, said the food-subsidy system had improved. Previously, subsidised bread was sometimes of poor quality and there was little demand for it, even among the poorest strata. It was sometimes used as poultry feed.
In tandem with the social-protection programmes, the state should adopt policies and programmes to increase industrial and agricultural production, Al-Mahdi said, adding that this could improve people’s living standards, create job opportunities, and decrease the number of the poor in the country.
The food subsidies have contributed to decreasing the number of poor people in Egypt. According to CAPMAS research, poverty rates are now 29.7 per cent, instead of the anticipated 34.2 per cent if food subsidies had not been introduced.
FUEL SUBSIDIES: The government has gradually lifted fuel subsidies over the past 10 years that had cost the state budget billions of pounds annually.
In 2012, Octane 95 fuel was sold at market prices, and the price of diesel increased. In 2014-15, the government announced its programme to sell fuel products at their cost price. The international drop in fuel prices in the second half of 2014 enabled it to do so.
In tandem, the government decided to float electricity prices gradually within five years. Later, it increased the period to three more years.
The price of Octane 92 fuel was raised to LE6.75 per litre, up from LE5, an increase of about 35 per cent. The price of Octane 80 fuel was also raised to LE5.5, up from LE3.65, an increase of 50 per cent. The price of Octane 95 increased to LE7.75 per litre, up from LE6.6, an increase of 17.4 per cent.
The price of diesel increased to LE5.5 per litre, up from LE3.65, an increase of about 50 per cent. The price of cooking-gas cylinders increased by 66.6 per cent to LE50 for home use and LE100 for commercial use.
The state’s decision to reduce the cost of subsidies on petroleum products targeted redirecting subsidies that had earlier been going to groups that did not need them. The International Monetary Fund (IMF) said energy subsidies in Egypt benefited the rich more than the poor, estimating that less than 40 per cent had benefited between 15 and 25 per cent of the value of subsidies.
The increases announced by the government in the prices of petroleum products in November 2016 raised inflation rates to unprecedented levels, however.
STATE SPENDING: According to CAPMAS, the state has spent LE1.6 trillion on subsidies over the past 10 years.
The average spending on subsidies per month was LE14.3 billion in fiscal year 2019-20, of which LE7.4 billion was spent on subsidised food commodities, LE4.4 billion on subsidised petroleum products, LE500 million to stimulate exports, LE3.3 million on subsidised electricity, LE325 million on support for low-income housing, LE299.7 million on subsidies for health insurance and medicine, LE154.2 million on transport subsidies, LE47.1 million on subsidies for farmers, and LE16.7 million on Upper Egypt’s development.
Egypt’s average spending on subsidies per day was LE477.1 million in fiscal year 2019-20, of which LE247.2 million was spent on subsidising food commodities.
SOCIAL PROTECTION: A host of social-protection campaigns have been launched since President Abdel-Fattah Al-Sisi came to office in 2014, including Proper Housing, a campaign aimed at rehabilitating 220,000 houses for poorer families that have subscribed to the Takaful, Karama, or social-security programmes.
The state has also focused on social housing. This project targets the poor and aims at constructing 725,000 housing units nationwide over six years.
According to the latest statistics on the social-housing project, 414,000 housing units have been built at a cost of LE51 billion. Some 194,000 units at a cost of LE37 billion are being constructed.
May Abdel-Hamid, CEO of the Social Housing and Mortgage Financing Fund, said in September that 320,000 housing units had been allocated to 320,000 families, or 1.6 million individuals, since the onset of the project in 2014, with total funding of LE32 billion.
The concept of social housing was launched during the rule of former president Hosni Mubarak. The social-housing project, known as the One Million Project, achieved 11 per cent of the total number of units that were planned to be implemented in 2012-13 and 2013-14.
Fewer than 1,000 families benefited from the project until the end of 2014, according to a study on housing policy in Egypt by the Egyptian Initiative for Personal Rights, a NGO, at the end of 2014.
Meanwhile, the “100 Million in Health” programme started in October 2018 has been one of the most popular programmes. It is a wide-ranging initiative to conduct comprehensive and free medical examinations for the Hepatitis C virus in addition to detecting non-communicable diseases such as diabetes and obesity.
The initiative has screened 50 million citizens for Hepatitis C and treated four million testing positive. It has also covered the screening of millions of women for breast cancer.
This was followed by the LE2 billion “Decent Life” initiative that aims to provide everything from decent housing to water and sewage networks. It also provides health services and equipment for the handicapped, helps needy brides get married, and provides job opportunities through micro-projects.
*A version of this article appears in print in the 24 December, 2020 edition of Al-Ahram Weekly