President Abdel-Fattah Al-Sisi announced on Saturday a set of measures aimed at helping people across the country cope with the increases in prices seen over recent months in a move that took many by surprise. The minimum wage would be increased to LE2,000 a month, Al-Sisi said, a 66 per cent increase over the LE1,200 applied since 2014. Starting from 1 July, all state employees will receive a raise of seven per cent, or a minimum increase of LE75 per month compared to LE65 last year, while those not subject to the civil service law will get a 10 per cent raise, also receiving at least an extra LE75 per month. All state employees will also receive an exceptional bonus estimated at LE150. Pensioners will get an increase of 15 per cent, or a minimum increase of LE150 per month, while minimum pensions will be raised to LE900 compared to LE750. Al-Sisi said that 100,000 families would be added to the Takaful and Karama programmes, social safety nets targeting help for the neediest people. “This was supposed to to be announced on 30 June. But this matter cannot wait,” the president said. The new measures aim at easing the impact of the government's economic reform programme on families. A series of economic reforms triggered by a $12 billion loan agreement with the IMF in 2016 has included devaluing the pound by almost 50 per cent, slashing subsidies, and imposing new taxes. While the average official inflation rate has not exceeded 13 to 15 per cent, some commodities including food items may have increased by at least 100 per cent. Following the president's announcement, the Ministry of Finance issued a statement explaining that the measures would cost the country around LE60 billion, of which LE30.5 billion would cover salary increases, LE28.5 billion would finance pensions, and LE1 billion would cover the addition of 100,000 families to the Takaful and Karama programmes. To meet the increased spending on wages the funds allocated for public-sector salaries in the budget for fiscal year 2019/2020 will surge to LE300 billion. Last week, the government approved the budget for fiscal year 2019/2020, which targets reducing total public debt to 89 per cent of GDP and cutting the budget deficit from eight to 7.2 per cent. The increases are intended to ease the burden on seven million state employees who have been hurt by the austerity measures applied since late 2016, Sherif Delawar, a professor of administration at the Arab Academy for Science and Technology in Cairo, said. However, he said, given that further reductions in fuel subsidies are expected at the beginning of the new fiscal year which is bound to push prices up, “the raises will only help employees to cover their basic needs,” he added. Egypt's inflation rate was 14.4 per cent in February, according to the Central Bank of Egypt (CBE). Cairo University professor of economics Alia Al-Mahdy, is also apprehensive that the raises will increase demand and thus inflation. However, Ahmed Hafez, head of MENA research at investment bank Renaissance Capital does not see a huge effect on inflation from the increase in the minimum wage. He said that not more than 10 to 15 per cent of the workforce will benefit of this increase. Furthermore, speaking to a roundtable of journalists, he said that the 11 per cent increase in expenditure on wages was not worrying. Al-Mahdy would have preferred that these increases be delayed until a few months after the removal of the fuel subsidies, scheduled for July, to give the market a chance to absorb the effects of the subsidy cut, Al-Mahdy said. Despite being a pleasant surprise, Faisal Lakosha, who works for the Misr for Spinning and Weaving Company in Mahalla Al-Kobra, worries the raises are not commensurate with the prices. He called for better supervision of the markets. “The same commodities are sold at two different prices on the same street because,” he said. Ahmed Saleh, an employee at the Ministry of Culture, agreed with Lakosha that more is needed to rein in greedy traders who exaggerate prices. To deal with this issue, the government last week launched an initiative to gather consumer complaints about greedy traders. Fifteen mobile complaint stations will collect complaints from consumers in Cairo and Giza under the new scheme. Furthermore, to provide consumers with alternatives, the government is working on making basic goods available through its own outlets in abundance and at reasonable prices.
