CAIRO: Finance Minister Samir Radwan said in a statement that Egypt will allocate LE 1.5 billion of additional spending for the General Authority for Supply Commodities (GASC) to finance the purchase of wheat from abroad.
Egypt also decided to give government employees a 15 percent raise in salaries and pensions as it seeks to bolster support amid mass protests, AP reported. Radwan said some LE 6.5 billion ($960 million) will be allocated to cover the increases, which will take effect in April for some 6 million employees.
Earlier in the week, the ministry allocated LE 5 billion to support small and medium businesses in the wake of the recent political uprising in Egypt,
Egypt’s government said it will bear any increase that may occur in the global prices of basic or supply commodities, and Radwan said the additional funds increase GASC’s spending ability to more than LE 2.8 billion.
“They were going to have to make this allocation anyway, given the absolute need to keep the basic food subsidies going and to address the ongoing price rises in global markets,” said Jennifer Bremer, chair of the public policy and administration department at the American University in Cairo.
According to Mohamed Rahmy, research analyst from investment bank Beltone Financial, this increase is in line with the previous administration’s obligations and promises to keep domestic prices in check.
Rahmy also commented that since the food subsidy bill is not such a significant part of government spending, the increase would not really have a great affect on the budget deficit, as opposed to the fuel subsidy, for example.
Bremer said the minister of finance had left out the fuel subsidy, which by far comprises the largest subsidy bill in the budget. She suggested that now would be a good time to begin passing through part of the global price rise, but not all of it.
She explained that since the fuel subsidy mainly targeted the rich and is considered the greatest burden on the budget, continuing to increase it is unsustainable given many other reforms and spending requirements that should be more of a priority.
The minister announced an increase of LE 100 million in funds for the Ministry of Social Solidarity for the current fiscal year to cope with around 150,000 more families now benefiting from social security pension.
“These appear to be short-term responses to help the economy get moving again. I would note that the pension amount works out to less than LE 700 per family, which is not much if this is meant to be the annual provision for a family, about LE 55 per week,” said Bremer.
“This seems lower than the normal pension. Perhaps it is meant for a shorter period, however. In any case, this will not address the needs of the educated youth, who were among the most active protesters, and for good reason,” she added.
The ministry also posted forms, Monday, for companies and individuals to request compensation for damages to vehicles and facilities that occurred in the past two weeks.
Bremer said that this represents a good move. “Assuming they have the ability to do this speedily, it will help small businesses and individuals to return to normal operations more quickly. It also suggests that the government is accepting some degree of responsibility for what happened,” she said.
The statement released by the ministry included news of customs outlets resuming work throughout the day, including Fridays and holidays, to facilitate import/export activities and a decision to postpone the payment of fines and the interest of sales tax.
As banks reopened their doors to international transactions on Monday, the Egyptian government attempted to sell $2.5 billion of short-term debt, Reuters reported. According to Bremer, the government does not have much choice but to do this to fund the extra spending.
In a final comment, Bremer said that given that the new prime minister did not name a minister of state for administrative reform, there is an opportunity to fold that apparatus into the prime minister's office or even the ministry of finance.
“There is an urgent need to address the efficiency and impact of the government's operations to improve services to citizens, especially in areas of basic social services, such as education and health. Civil service reform is also much-needed, to create incentives for public sector and government workers to be more effective,” she concluded.
