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PM: Egypt Eyes Shift from Commodity Subsidies to Cash Payments by July 2025

FILE PHOTO: Birds fly during sunset with Cairo skyline visible in the background, during foggy cold weather, Egypt February 1, 2024. REUTERS/Amr Abdallah Dalsh/File Photo
FILE PHOTO: Birds fly during sunset with Cairo skyline visible in the background, during foggy cold weather, Egypt February 1, 2024. REUTERS/Amr Abdallah Dalsh/File Photo
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PM: Egypt Eyes Shift from Commodity Subsidies to Cash Payments by July 2025

FILE PHOTO: Birds fly during sunset with Cairo skyline visible in the background, during foggy cold weather, Egypt February 1, 2024. REUTERS/Amr Abdallah Dalsh/File Photo
FILE PHOTO: Birds fly during sunset with Cairo skyline visible in the background, during foggy cold weather, Egypt February 1, 2024. REUTERS/Amr Abdallah Dalsh/File Photo

Egypt could begin transitioning from subsidizing essential commodities to providing direct cash assistance to its poorest citizens as early as the next fiscal year (July to June), Prime Minister Mostafa Madbouly said on Thursday.
Currently, Egypt subsidizes essential commodities for more than half of its population. Over 60 million people have access to discounted prices on staples like pasta, vegetable oil and sugar through state-run outlets, while at least 10 million more benefit from subsidized bread.
“There is widespread consensus that cash subsidies are the way forward,” Madbouly told a press conference, noting that the Ministry of Supply, which oversees Egypt’s subsidy program, is exploring various scenarios for this significant policy shift.
Madbouly expressed optimism that the initial phase of the transition could start in the upcoming fiscal year, provided that consensus was reached on the matter at a year-old national political dialogue that is discussing a variety of reforms.
However, Reuters said that he emphasized that the transition would unfold gradually, in several stages.
The National Dialogue, initiated by President Abdel Fattah al-Sisi in April 2022 amid one of Egypt’s most severe economic crises, aims to generate political, economic, and social reform recommendations for the President's consideration.
The government also subsidizes fuel but has outlined plans to reduce these subsidies, aiming to restore fuel prices to their full cost by December 2025.

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Egypt Central Bank Expands Lending to Government, but Inflation Slows

FILE PHOTO: A general view of the new headquarters of Central Bank of Egypt, at the New Administrative Capital (NAC) east of Cairo, Egypt December 8, 2023. REUTERS/Amr Abdallah Dalsh/File Photo
FILE PHOTO: A general view of the new headquarters of Central Bank of Egypt, at the New Administrative Capital (NAC) east of Cairo, Egypt December 8, 2023. REUTERS/Amr Abdallah Dalsh/File Photo
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Egypt Central Bank Expands Lending to Government, but Inflation Slows

FILE PHOTO: A general view of the new headquarters of Central Bank of Egypt, at the New Administrative Capital (NAC) east of Cairo, Egypt December 8, 2023. REUTERS/Amr Abdallah Dalsh/File Photo
FILE PHOTO: A general view of the new headquarters of Central Bank of Egypt, at the New Administrative Capital (NAC) east of Cairo, Egypt December 8, 2023. REUTERS/Amr Abdallah Dalsh/File Photo

Lending to the government by Egypt's central bank continued to climb in the last fiscal year, according to the central bank's newly released annual budget, even as inflation has slid from an all-time peak in September.

Central bank figures show "M1" money supply, which includes domestic currency in circulation and demand deposits in Egyptian pounds, jumped by 31.1% in the year to end-June 2024, after growing 33.4% in the fiscal year to end-June 2023 and 23.1% in fiscal 2021/22.

The sharp acceleration in money supply growth has come during four years in which Egypt's underlying economic weaknesses have been exposed by a series of shocks including the COVID-19 pandemic and the war in Ukraine.

Headline inflation, however, declined from a record 38.0% in September to 25.7% in July, Reuters reported.

"If anything, M1 money supply in percent year-on-year terms has slowed from its peak of nearly 50% in February, which may be adding to the momentum of price changes (such as the decline in food inflation) in driving the headline rate of inflation in Egypt down over the course of this year," James Swanston of Capital Economics said.

As of the end of June, the central bank had 1.36 trillion Egyptian pounds outstanding in securities purchased from the finance ministry, up from 1.09 trillion a year earlier, according to its budget, released on Tuesday.

These included 940.3 billion pounds in local currency bonds purchased from the finance ministry as of end-June, up from 818.9 billion pounds in June 2023.

Egypt pledged to the International Monetary Fund in an $8 billion financial support agreement signed in March that it would reduce central bank lending to the government.

Egypt also promised that the central bank would stop sidestepping the finance ministry by lending hundreds of billions of pounds to other government agencies.

Such lending fell to 766.8 billion pounds as of end-June from 887.6 billion pounds a year earlier, according to the central bank budget.

Egypt pledged to the IMF in June that it would reduce such borrowing by other government agencies by 150 billion pounds by the end of June and by 100 billion pounds in subsequent years until it had fallen to zero.