NAC’s new mosque shows out Sisi’s fiscal imprudence

While Abdel Fattah El-Sisi inaugurated the Misr Great Mosque, Egypt’s Islamic Cultural Center in the New Administrative Capital, with an area of 19,100 square meters and a capacity of more than 100,000 prayers, in addition to a multi-level garage, malls, funeral paths, halls, and others, he even entered the Guinness Book of Records with three certificates, the first being the most prominent pulpit in the world, the second largest chandelier in the world, and the third heaviest chandelier in the world, at the cost of 800 million Egyptian pounds ($25.8 million). Recently, it goes back to the crisis in 2016, when the government embarked on a long-term debt journey. According to official figures, Egypt is experiencing the worst consumer inflation ever, reaching 32.9 per cent, with a core inflation rate of 40 per cent. This was affected by the prices of essential commodities, which rose by 61.5 per cent last February due to the government’s repeated devaluation of the pound against the US dollar for more than half, amid a nomination for further cuts, in light of the lack of foreign exchange.

The government claims that the economic crisis is imported from abroad due to the Coronavirus crisis, then the Russian war on Ukraine crisis and the withdrawal of hot money from the Egyptian banking system due to the US Federal Reserve raising interest rates. However, the International Monetary Fund, economists and opposition experts confirmed that the government’s policies of expanding debt and spending on projects are useless to the economy at present, with its failure to achieve any dollar return that would enable it to pay off its debts and material obligations to the market.

The paper indicates that poor and near-poor families who spend half of their income on food changed their consumption pattern and spending on unsubsidized food commodities so that household consumption of meat decreased by 85 per cent, 75 per cent of eggs, 73 per cent of poultry, 61 per cent of fish, and 60 per cent reduced consumption of dairy. The poorest families also tend to replace some nutrients with what is less expensive and has less nutritional value, thus increasing the consumption of potatoes and pasta.

The paper confirms that this pattern preceded the current economic crisis due to the high inflation from 2016 until the beginning of 2022. According to official data, about a third of families were unable to provide their minimum basic needs such as food, housing, clothing, and transportation, with a percentage of those below the poverty line, 29.7 per cent of the population earn less than 857 Egyptian pounds ($27.7) per month. For more clarity, this amount spent on basic needs has lost 50% of its value in the current crisis.

The paper says that this inflationary wave is not a spur of the moment, and what proves the failure of the official version of the crisis is the results of the state’s policies, which began with the agreement with the International Monetary Fund on loan in November 2016, which led to an increase in the government’s dollar obligations, which made the economy fragile to resist any shock of the lack of foreign exchange, which was a significant cause of the economic crisis first, the increase in commodity prices globally, then, the lack of foreign exchange, which resulted in the delay in the import process, which led to a shortage of commodities and an increase in their prices, in addition to the depreciation of the value of the pound and thus the increase in the cost of import, this is in an economic system that relies 40 per cent of it on imported goods, and the majority of the highest goods are those that depend on imported materials. The paper dates back to the year following the flotation for the first time when inflation reached 29.5 per cent. Despite the subsequent decrease in inflation before the current crisis, this did not mean a decline in prices but rather their stability at a high level.

Despite the government measures that it announced, starting with raising the minimum wage, increasing the minimum tax exemptions, and increasing allocations for official social protection programs, in the paper issued by the Egyptian Civil Organization this month, which refers to those who cannot secure their basic needs and not those who have the minimum of their basic needs, indicates that the increases are not considered valuable when compared to the exchange rate. The picture is complete when we say that the growth does not reach half the inflation rate at a time when 90 per cent of Egyptian individuals earn less than the minimum wage set by the government, up to Less than two thousand pounds ($70). Also, the tax exemption limit is covered by additional taxes paid by the highest paid in a tax system that mainly pressures the lower classes, in addition to the increase in the sums of money from the Takaful and Karama Social Protection Program. Still, after the rise, the value of the support provided to beneficiaries will be between 438 and 625 pounds (13.7 and 20.22). Dollars), and this subsidy covers only half of the low-income people.

The paper suggested three solutions to deal with the crisis. The first is policies that enable the economy to get out of debt crises and change policies based on the production of tangible goods and services; without them, no support programs or raising wages will be able to protect the majority of Egyptians from deteriorating living standards. The second is relying on food subsidies to protect the most vulnerable groups and returning to the commodity support system less affected by the increasing inflation, instead of the cash support system, whose value decreases with the depreciation of the pound and the rise in prices. The third is to amend and reduce the tax system directly related to consumption, such as the value-added tax. At the same time, the government is ready to give up some of its expected revenues, as it does by repeatedly deferring the capital gains tax.