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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.

BLOOMBERG