The Ministry of Supply has increased its allocation to food commodity subsidies in an attempt to outpace the current inflation rate caused by the Egyptian pound’s devaluation.
The ministry’s decision comes as part of a governmental plan to ease the economic burden on citizens, according to a source at the ministry.
The value of the US dollar against the Egyptian pound appreciated to EGP 11 in the parallel market on Thursday, driven by high demand from importers and the erosion of foreign currency holdings, which have followed receding direct foreign investments, tourism revenues, exports, and remittances.
The Egyptian government has issued about 20m subsidies cards, which provide food commodities to 80 million citizens across the republic, according to data from the Ministry of Supply.
“The value of subsidy allocations will increase by 15% next month,” Minister of Supply Khaled Hanafy said on Sunday, in a televised interview.
To circumvent the current pressures on food commodities, the government will pursue two measures, according to a source in the Egyptian cabinet. In the first instance, the Ministry of Supply will offset inflationary pressures by allocating additional funds to the subsidy programme. In the second instance, Armed Forces will sell food commodities to citizens from mobile outlets at prices 50% lower than the usual market value.
The rate of inflation increased by 1.4% from February to March, according to Central Agency for Public Mobilisation and Statistics (CAPMAS).
“Increasing subsidy allocations will put stress on the state’s budget,” said the former executive chairperson of the International Monetary Fund (IMF) Fakhry El-Fekky. However, the effect would be temporary until the economic situation improves and the pound gains strength against the dollar with the recovery of tourism and investments, he argued.
The government’s move came a few hours after the president’s Sunday speech commemorating Sinai Liberation Day. Al-Sisi directed the government to increase subsidies to match the price hikes caused by the fluctuating price of the dollar against the pound.
