As Egypt Eyes Subsidy Cuts, Mid Income Brackets in Crosshairs

(Bloomberg) -- Egypt’s government is considering stripping ration cards for subsidized food from people who earn around double the average monthly salary, the supply minister said in a statement Sunday.

The comments by Ali El-Mosilhy came during a discussion in parliament in which the minister outlined the government’s efforts to better streamline the subsidy system to ensure it targets the neediest of the nation’s almost 100 million residents.

“Until now, there’s a direction” being pursued that would deny ration cards to those who make more than 7,000 pounds ($390), El-Mosilhy said in the statement, stressing that this “wasn’t a final number.”

Cutting spending, including on subsidies for food, energy and electricity, has factored large in the government’s efforts to revive the economy. Egypt launched a sweeping reform program in November 2016 built around devaluing the currency, but which also included cutting energy subsidies.

Government statistics released earlier this year show that the average monthly salary for public sector workers in 2016 was around 4,600 pounds compared to 2,680 for the private sector.

Food subsidies, however, are a contentious issue in a nation where around half of the population lives near or below the poverty line and relies on subsidized bread and other foodstuff to offset the otherwise rising cost of living. The government has been wary of tampering with food subsidies for fear of stirring unrest, even as it has raised fuel prices three times since floating the currency.

Annual inflation accelerated to 17.7 percent in October, its highest since December 2017, in a surge seen largely linked to food prices. Core inflation in October, however, came in at 8.86 percent. That measure, which is released by the central bank, strips out food prices and other regulated items.

To contact the reporter on this story: Abdel Latif Wahba in Cairo at alatifwahba@bloomberg.net

To contact the editors responsible for this story: Tarek El-Tablawy at teltablawy@bloomberg.net, Amy Teibel

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