Egypt Moves Closer to Replacing Food Subsidies with Cash Payments, Reports Reuters

CAIRO (Reuters) – A forum initiated by Egypt’s president began discussions on Monday regarding a potential transition in the country’s subsidy program, proposing direct cash payments instead of providing food products at reduced prices. Many economists believe this shift could enhance efficiency.

Transitioning to cash payments would be a notable change, as Egypt has a long history of offering subsidies for staples like bread to a large portion of its population. Past attempts to reform this politically sensitive program have often triggered protests.

According to the 2024/25 budget, Egypt allocates approximately 370 billion Egyptian pounds (about $7.6 billion) for direct subsidies, with 36% directed towards food assistance. Over 60 million citizens currently benefit from discounted prices on essentials such as pasta, vegetable oil, and sugar, with at least 10 million more relying on heavily subsidized bread.

For several months, President Abdel Fattah al-Sisi and senior officials have criticized the existing subsidy system, contending that it does not adequately support the most vulnerable communities and imposes a significant strain on national finances.

The International Monetary Fund, which is providing Egypt with an $8 billion loan as part of its latest support program, stated in August that reducing untargeted subsidies could create more opportunities for social protection and human capital development.

In 2022, Sisi introduced the National Dialogue, aiming to facilitate policy discussions and recommendations within state-defined parameters. However, many of the forum’s suggestions remain unimplemented. Yet, former minister and national dialogue board member Gouda Abdel Khalik noted that the ongoing discussions about subsidies indicate the government’s intention to proceed with reforms.

“The government is committed to reducing subsidies, and they are utilizing the national dialogue to frame it as expert-supported,” Abdel Khalik remarked.

On Sunday, the National Dialogue released a statement outlining the potential advantages of transitioning to cash subsidies.

Approximately 60% of Egyptians are estimated to be living at or near the poverty line, with many relying on subsidies as prices continue to rise and the currency weakens.

Economist Mohamed Fouad from the American University in Cairo indicated that cash subsidies could more effectively target those in need, provided there are clear criteria established for how these payments would be allocated and tied to inflation.