Egypt in spend­ing mode

The National - News - Business - - The Region -

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.

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