Under Egypt’s austerity measures the middle class is declining

July 15, 2019

The Egyptian people have suffered a grinding economic crisis since al-Sisi took office in 2014 after he ousted the late President Mohamed Morsi, allegedly in response to demonstrations. Since then the price increases and austerity measures have became brutal. These increases extend to all kinds of commodities including services, real estate, fuel and energy, without a rise in salaries.

According to The World Bank Group, “some 60 per cent of Egypt’s population is either poor or vulnerable, and inequality is on the rise.” Despite the research conducted by the Central Agency for Public Mobilisation and Statistics on the expenditure and income rates every two years, the last declared number on the poverty rate in Egypt was in July 2016 when it stood at 27.8 per cent.

The fact that reports on the poverty rate were not being issued drove a member of the economic affairs commission in the parliament to demand the government provide up-to-date data and monetary support for the neediest families. 

The Prime Minister Moustafa Madbouly stated that, “government efforts must be redoubled to limit the poverty rate in Egypt, through initiating a clear development in all fields and establishing projects that could provide job opportunities, and [increase] literacy in Egypt.”

Member of Parliament Amal Rizqallah said that The World Bank Group confirmed that some 60 per cent of Egypt’s population is either poor or vulnerable, and emphasised the necessity of intensifying efforts to integrate the growing labour force.

Rizqallah also emphasised that there is a blackout by the government on the poverty rate. Although there was a recent count conducted by concerned authorities at the top level, the poverty rate still hasn’t been announced. Rizqallah hinted that the percentage increase requires quick and immediate intervention; among the most prominent solutions is financial support and providing in-kind support for the poor, besides the increase of investment generally and intense labour projects to reduce the unemployment rate.

The Prime Minister demanded the government declare a clear strategy to limit poverty rates in Egypt, and confront the cramped living conditions. 

The erosion of the middle class 

World Bank data has indicated the decline of middle class families into poverty. It’s expected that this percentage will keep rising under the current economic policies until this class eventually disappears. Egypt’s middle class has declined more than anywhere else in the world from the beginning of the 2000s to 2015 at 48 per cent, from 5.7 million in 2000 to 2.9 million in 2017. These numbers mean that the middle class is roughly five per cent of the total number of adults. They possess one quarter of Egyptians’ wealth despite the major increase in the population, according to data published by Credit Suisse bank which specialises in wealth estimation. 

A report expected that the middle class could be more vulnerable to being influenced by the austerity measures adopted by the government through its economic reform programme.  

Some observers attributed the Egyptian government’s decision to float the Egyptian pound as one of the reasons for the decline of the middle class. After the pound was floated there were “price increases, inflation at 33 per cent, value added tax implementation, an increase in fuel prices, increases in public and private transportation prices and an increase in metro tickets.”

Price increases 

The last rise of fuel prices is the fifth since al-Sisi took office, and the fourth after the decision to float the pound in 2016. Authorities decided to increase fuel and oil products in accordance with the removal of fuel subsidies.

The biggest increases were in gas cylinders, which went up by 30 per cent, that is EGP 65 for household consumption and another increase for commercial consumption up by 30 per cent at EGP 130. The black oil used in brick-making also increased to 4,500 EGP/Ton.

Such increases will be followed by a rise in the price of commodities and transportation. Almost immediately transportation increased by 15 per cent.

In the same week the price of fuel rose, the Ministry of Electricity and Renewable Energy initiated a rise of electricity prices at 14.9 per cent,  more than last year. Two previous increases in the price of electricity have been implemented, the first in July 2016 ranging from 17 to 46 per cent, then in July 2017 at different percentages ranging from 18 to 41.1 per cent, according to the consumption segment.

Dripping increases of salaries and pensions 

The Revolutionary Socialists Movement issued a statement on July 7 2019 concerning the impoverishment policies adopted by the current regime in a statement entitled “Hungry people of Egypt, unite against  austerity measures.”

“The government has established a new wave [of austerity measures] through the new fuel increases… despite the detrimental effects of the previous increases on the Egyptian people, the authorities are determined to keep what it calls a ‘reform plan’ going. This treatment is vengeance on people who revolted against poverty, exploitation and dictatorship. It’s also an implementation of the requirements of the International Monetary Fund for loans,” said the movement’s statement.

The movement indicated that “the last wave of increases came a few months after the President’s decision to increase the minimum wage for salaries and pensions, however the increase will swallow the rest of the Egyptians’ savings. In price increases there is opulence, whilst salaries and pensions drip in.”