Egypt's Shift from Food Subsidies to Cash Support: A New Economic Strategy
In a significant policy shift, Egypt is considering replacing its long-standing food subsidy system with direct cash support for its citizens. This proposal emerged during the National Dialogue forum initiated by President Abdel Fattah el-Sisi, aimed at addressing economic challenges and improving the efficiency of government support programs. Currently, Egypt allocates approximately EGP 370 billion ($7.6 billion) to subsidies, with 36% directed towards food items, including bread, which benefits over 10 million people.
The current subsidy system has faced criticism for not adequately supporting the most vulnerable populations while placing a substantial burden on the country’s finances. Minister of Supply Sherif Farouk expressed optimism about the transition to cash support, suggesting that it could be implemented at the start of the new budget, albeit gradually and on an experimental basis in select areas.
The International Monetary Fund (IMF) has also weighed in on this issue, advocating for the reduction of untargeted subsidies to create more room for social protection and human capital development. In light of rising prices and a weakening currency, an estimated 60% of Egyptians live below or near the poverty line, making the need for effective support systems more pressing than ever.
Economists, including Mohamed Fouad from the American University in Cairo, support the move towards cash support, emphasizing the importance of establishing clear criteria to ensure that aid reaches the neediest citizens. This shift reflects a broader intention by the government to reform the subsidy system, although past attempts have often led to public protests. As the discussions continue, the government aims to balance economic reform with social stability, ensuring that any changes genuinely benefit those in need.
