Egypt's Shift from Subsidies to Cash Assistance Signals Major Policy Change

Egypt may transition from subsidising essential commodities to offering direct cash assistance to its poorest citizens starting next fiscal year. Currently, over half of Egypt’s population benefits from subsidies on essentials like food items and fuel. Prime Minister Madbouly emphasized a gradual shift to cash subsidies to better target aid.

Prime Minister Mostafa Madbouly announced on Thursday that Egypt could begin the transition from subsidising essential commodities to providing direct cash assistance to its poorest citizens as early as the next fiscal year, running from July to June.

Currently, more than half of Egypt's population benefits from subsidized essentials, including food items such as pasta, vegetable oil, and sugar, as well as fuel. Speaking at a press conference, Madbouly noted that the Ministry of Supply is exploring various scenarios for this significant policy shift and emphasized that the transition would unfold gradually in several stages.

The National Dialogue, initiated by President Abdel Fattah al-Sisi in April 2022, aims to generate recommendations on political, economic, and social reforms amid one of Egypt's most severe economic crises. The IMF recent report highlights the necessity of better targeting food subsidies and removing ineligible individuals. The Egyptian government is awaiting feedback from the National Dialogue before making final decisions.

(With inputs from agencies.)