Recent statements by Prime Minister Mostafa Madbouli and Supply Minister Sherif Farouk indicate that the transition is only a matter of time.
One of the strongest arguments in favour of in-kind subsidies is that they provide protection against inflation. By subsidising essential goods directly, the government can ensure that families have access to basic commodities regardless of fluctuations in prices. They also provide food security for vulnerable groups as beneficiaries receive a minimum amount of essential food items and a basic level of nutritional support.
However, the government’s argument is that the in-kind system has become inefficient. According to Madbouli, inefficiencies in the subsidised bread programme alone amount to around 25 per cent. According to government statements the cash subsidy system would allow public resources to be directed to those who genuinely need support, reducing losses overall.
Under a cash subsidy system, beneficiaries would receive direct financial support and would be free to decide how best to spend it. Officials argue that this would improve the purchasing power of citizens, and provide greater flexibility in managing household budgets. Supply Minister Sherif Farouk has repeatedly stressed that the goal is not to reduce support but to improve the manner of its delivery.
Another argument in support of cash subsidies is that the current system creates market distortions. A cash-based system, officials argue, would help to eliminate the dual-pricing structure and allow markets to operate more efficiently while preserving social protection.
Under the proposed framework, households would be classified into different income brackets, with poorer families receiving larger cash transfers. In this way the government aims to direct the greatest level of assistance to those most in need rather than distributing subsidies equally across the population.
While many economists support the idea of cash subsidies for exactly the reasons stated by the government, there are concerns that must be taken into account in the process of implementing them.
The first concern is inflation. Cash subsidies can lose value quickly if prices rise faster than the level of support provided. Egypt is no stranger to inflation, with the past few years seeing soaring rates, especially following currency devaluations and energy price hikes. Subsidy payments must be regularly reviewed and adjusted, otherwise vulnerable households will find their purchasing power declining over time.
Accurately identifying beneficiaries is another challenge. There is a risk that families who really need the subsidy end up being left out, or that individuals who do not qualify are included. Such errors could weaken confidence in the programme and create social tensions. Acknowledging this challenge, the government has stressed that it would continuously update beneficiary databases and integrate information from multiple social protection programmes, including social insurance, social housing, universal health insurance as well as Takaful and Karama.
Officials have also highlighted the growing role of digital technology and data analytics in improving targeting accuracy. Advanced data analytics will be used to remove ineligible beneficiaries and add newly eligible ones, ensuring support is directed to those most in need, government officials have said. By linking databases across government agencies, the government aims to identify families that need support while removing beneficiaries whose economic conditions have improved.
Moreover, the government has said that there will be grievance and appeals mechanisms to protect citizens’ rights and allow those who believe they qualify for support to request a review of their status.
Many citizens remain suspicious that changes to the subsidy system could ultimately lead to weakened support. The government must explain the details of the new system extensively before implementation and must only proceed with the reform if it is deemed beneficial to citizens.
* A version of this article appears in print in the 11 June, 2026 edition of Al-Ahram Weekly
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