Al-Sisi’s decision to raise the minimum wage suggests imminent wave of high prices

With great irony and a faint smile, Said El-Messiri, an employee at a government institution in Egypt, commented on the presidency’s announcement of raising the minimum wage as part of the wage allocations announced in the budget for the next fiscal year.

This irony is a natural result of what the situation in the country will entail in the coming months, from an expected rise in the prices of essential commodities, pointing out that the real fear relates to what is expected of an annual wave of high prices. Egyptians rely on previous decisions to approve bonuses, followed by others to raise prices until Egyptians circulate a famous phrase that what the government offers by the right hand it takes with the left.

According to the presidential statement, the authorities will raise the minimum wage for workers in the state’s administrative apparatus from EGP 2,000 to 2,400. Wage allocations in total in the new general budget will be increased by EGP 37 billion, compared to wage allocations in the current year. The new increase represents the lowest percentage increase in the minimum wage since 2010. That year witnessed the first increase in the minimum wage since 1984, which was frozen for nearly 26 years until the government was forced to raise it against the backdrop of a court ruling.

Although the record increase in the minimum wage in 2010 appears to be justified by the fact that the decision came after 26 years of stopping any increases, the two subsequent increases in 2011 and 2013 have been issued at close intervals. Yet, they witnessed a much more significant increase than the 2010 decision. The law that is expected to be enacted does not include raising the minimum wage for workers in the private sector. However, the private sector’s average weekly salary is less than that of the public business sector by more than 45 per cent. Although this increase will take effect early next July, its announcement directly impacts the increase in some consumer goods’ prices. According to local media, the expected wave of price increases will include fuel and various brands and water consumption segments.

Media leaks also talk about an expected increase in prices by 20 per cent due to the Egyptian government’s plan to fully liberalise fuel prices (raising subsidies), which will make them subject to international fees. It is also expected that the increase in the prices of these services will raise the costs of essential and critical strategic commodities for the Egyptian citizen, especially the prices of foodstuffs, vegetables, and fruits, due to their inherent link to public service prices.

Egypt had previously raised electricity prices during Abdel Fattah Al-Sisi’s reign, seven times during the five years since 2014. As for fuel, the government has raised its prices four times since 2016 until now. Economists believe that the increase in prices is also linked to the International Monetary Fund’s agreement and the new loan obtained by Egypt.

The economic expert, Mamdouh Al-Wali, points out that the anticipated increase in the prices of various goods and services will greatly impact the lives of Egyptians and that its timing coincides with a recession caused by weak demand. The expected price increases will exceed the increase in employees’ wages and pensions, which will be implemented starting from July. Al-Wali points out that government workers, who represent only a sixth of the segment of workers in Egypt, are the beneficiaries of these modest increases in the face of the anticipated wave of price hikes. These workers will raise the prices of their services to compensate for part of their cost of living increases. Al-Wali argues that the official authorities will continue to declare inflation rates that are lower than the reality to reduce the impact of societal harm, but this will not limit the Egyptians’ continued bearing of the cost of the price increases against their will without objection, in light of the security oppression of those who announce their complaint.

The economist at the American Academy of Oakland, Moustafa Shaheen, believes that these increases lead to what economists call “a decrease in real income.” He says that it will reduce citizens’ consumption, lead to a recession in the economy, and increase inflation, which will have significant repercussions on the economy. On the other hand, he believes that Egyptians have no choice but to accept the increases and coexist with it, despite what it will bring about in terms of the transfer of social classes to fewer economic strata and the deterioration of the business sector’s environment in Egypt.