Cario - The Egyptian government approved a social spending
plan to support lower and middle income families after inflation surged to the
highest levels in decades following the flotation of the pound.
The government plans to spend 45 billion Egyptian pounds
($2.48 billion) on income tax discounts, bonuses for public employees, and
increased pension payments and cash subsidies during the fiscal year beginning
July 1, Finance Minister Amr El-Garhy told reporters in Cairo. The package,
excluding the cash subsidy raise, requires parliament approval.
The plan is part of the government’s effort to ward off any
unrest over economic reform measures taken in a nation where nearly half the
population lives near or below the poverty line.
Inflation has surged to more than 30 percent since
authorities removed currency restrictions, raised the price of subsidized fuel
and introduced value-added taxation last year before securing a $12 billion
loan from the International Monetary Fund.
The bulk of the money 34 billion pounds will go to raise
pension allowances and pay public sector cost of living adjustments, El-Garhy
said. Deputy Finance Minister Ahmed Kouchouk said the government took the cost
of the measures into consideration when preparing the 2017-18 budget, and still
expects a budget deficit of about 9 percent of gross domestic product, he said
in an interview on Al Arabiya TV.
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The pound has lost about half its value against the US
dollar since November. Officials say the IMF deal is helping Egypt to restore
confidence necessary for economic recovery as overseas investors pour billions
of dollars into Egyptian debt and equity markets.
Inflation, meanwhile, is seen persisting, with the
government expecting it to average 23 percent in the coming fiscal year. Last
week, the central bank raised interest rates by 200 basis points, as
authorities are expected to cut electricity and fuel subsidies in the coming
fiscal year.