Egypt in spending mode
The Egyptian government approved a social spending plan to support lower and middle-income families after inflation surged to the highest level in decades following the flotation of the pound. The government plans to spend 45 billion Egyptian pounds (Dh9.13bn) on income tax discounts, bonuses for public employees and increased pension payments and cash subsidies during the fiscal year beginning July 1, Amr El Garhy, the finance minister, said yesterday. The package, excluding the cash subsidy rise, requires parliament’s approval.
The plan is part of the government’s effort to offset the effect of economic reform measures taken in a country where nearly half the population lives near or below the poverty line. Inflation has surged to more than 30 per cent since authorities removed currency restrictions, raised the price of fuel and introduced value added tax last year, before securing a US$12bn loan from the IMF.
The bulk of the money – 34bn Egyptian pounds – will go to raise pension allowances and pay public-sector employees cost-of-living adjustments, Mr El Garhy said. The cabinet also approved raising the minimum income tax threshold to 7,200 Egyptian pounds a year from 6,500 pounds, said Amr Al Munir, the deputy finance minister for fiscal policies. The pound has lost about half of its value against the US dollar since November.
Inflation, meanwhile, is persisting, with the government expecting it to average 23 per cent in the coming fiscal year. Authorities are expected to cut electricity and fuel subsidies in the coming fiscal year.