Egyptian families creak under poverty with the subsidy cuts

The future of subsidies in Egypt does not bode well, in light of the successive increases in prices in all areas, which will not be the last, as they have continued over the past years. Since Abdel Fattah al-Sisi came to power, he reduced the weight of the “bread of the poor” three times, until it reached 90 grams, down from 130 grams in 2013.

This is an indirect increase in the price of bread, meaning that the people were paying 25 piasters to get his quota of five loaves and weighing 550 grams, but after the new increase, he will get the same number of loaves at the same price, but the weight will drop to 450 grams. Thus, the citizen lost an entire loaf of his share, equivalent to 18 per cent. It also reduced the number of beneficiaries of bread subsidies by 2 million citizens and deleted 10 million from the system of food supplies. This year, the bread subsidy bill in the state’s general budget was reduced from EGP 52 billion last year to EGP 47 billion, though it was expected it would increase in the new budget due to corona and the increase of beneficiaries. It also doubled the prices of gasoline tube prices by about eight times its cost in 2013, and of diesel and gasoline to five times what it was.

The Ministry of Transport also raised metro ticket prices by 40 per cent to 66 per cent in one go. The increase in commodity prices comes in light of the Egyptians’ suffering, the loss of a large number of jobs, and thousands of them joining the queue of unemployment. Egypt’s unemployment rate recorded an increase of 9.6 per cent in the second quarter of 2020, compared to 7.5 per cent a year ago. Only the working class, day labourers, and people on a low income are entitled to subsidised bread.

As for the businessmen who benefit from projects of the armed forces, judges, and officers, they are not affected by the decisions of increasing prices. The price hike also came in conjunction with al-Sisi signing a law to deduct one per cent of workers’ income, monthly, for 12 months, and 0.5 per cent of pensioners’ net income for the symbiotic contribution in facing the economic repercussions resulting from the spread of epidemics.

In return for the deduction, the government increased allocations to the expenditures section, which allocates its resources for the budgets of the national security, judiciary, the House of Representatives, and the Central Auditing Organisation, from EGP 74 billion ($4.6 billion) last year to EGP 105 billion ($6.6 billion).

According to the economic expert, Abdel Tawab Barakat, the decision to increase prices is inconsistent with the government’s pledge to the IMF to expand the umbrella of social protection to alleviate the repercussions of corona, in exchange for a quick loan of $5.2 billion. He added, “In light of the favouritism, indulgence and generous lending that the Egyptian regime enjoys from the fund without other governments in the region, the first was to postpone raising prices until the internal market recovers and the recession recovers, and the static situation since November 2016 is fixed.” Barakat continued, “The price hike exacerbates the suffering of the poor, whose percentage reached 32 per cent, according to the latest estimate of the Central Agency for Public Mobilisation and Statistics, compared to 27.8 per cent in 2015.”

The World Bank previously said in May 2019 that 60 per cent of Egyptians are either poor or vulnerable to poverty. Last March, the Egyptian Minister of Planning, Hala al-Saeed, admitted the high rates of poverty due to the implementation of the economic reform programme, which constituted a burden on society between 2016 and 2018. Barakat asked: “Is it possible for the world’s governments to reduce the prices of transportation, electricity, diesel and gasoline prices, due to the low oil prices, and to alleviate the citizen because of the repercussions of corona, and in Egypt, the prices are not fixed but rather increased?”