Government approves EGP 45bn social security package

Mohamed Ayyad
4 Min Read

The government announced on Sunday a huge package of extraordinary measures to compensate citizens for the effects of the inflationary wave resulting from the economic reforms.

These measures include exceptional allowances to cope with the high prices and the implementation of the tax deduction policy, which the government talked about a few weeks ago. These measures cost about EGP 21bn, according to Minister of Finance Amr El-Garhy.

According to government sources, the government intends to raise electricity and water prices—as well as that of gasoline and diesel—in July 2017, which will increase pressure on citizens, and it warns of a high rise in the price of other commodities.

The measures also included an increase in pension by 15% for 9.5 million citizens, with a minimum of EGP 130. The increase will be applied on 1 July. “Takaful and dignity” pension will also be increased by about EGP 100 per month, equivalent to 30%, serving 1.7 million cases.

In addition, the government will provide an exceptional allowance of 7% for those falling under the Civil Service Law, with a minimum of EGP 65 and a maximum of EGP 130. It will also provide a special allowance of 10% for other employees with a minimum of EGP 65 and a maximum of EGP 130. The minimum tax exemption will also be increased to EGP 7,200 instead of EGP 6,500 annually.

Despite these huge compensatory measures, they do not meet the recent wave of inflation, according to the initial calculation of the value of the compensation compared to the real value of inflation.

According to the Central Agency for Public Mobilization and Statistics (CAPMAS), the average inflation rate in the six months following the flotation of the pound on 3 November was 28.5%, which means that the real value of the average citizen’s income reached 71.5% of the previous value of his salary according to market prices.

For example, an average government employee falling under the third segment of the taxpayers, with a monthly income of EGP 3,956, will receive the maximum allowance announced by the government yesterday of EGP 130.

It means that the government will compensate this employee by about 24.9% compared to what they lost as a result of high prices.

On the other hand, the average pensionser who gets EGP 3,670 monthly will receive a maximum EGP 550.5 from the government compensation package, according to Said Al-Sabbagh, head of the Pensioners Association.

However, the real value of this pension, before adding the new increase and discounting the impact of inflation, currently amounts to EGP 2,624, which means a loss of EGP 1,046 due to high prices. In other words, the government will compensate this pensioner by 52.6% of what they lost from their pension as a result of inflation.

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