Egypt moves closer to replacing food subsidies with cash payments By Reuters

CAIRO (Reuters) – A forum set up by Egypt’s president began discussing on Monday a possible shift in the country’s subsidy program to direct cash payments instead of offering food at reduced prices, a system that many economists say it could be more efficient.

Any move toward cash payments would be significant because for decades Egypt has subsidized bread and other staples for much of the population, and previous attempts to reform this politically sensitive program have led to protests.

Egypt spends about 370 billion Egyptian pounds ($7.6 billion) on direct subsidies, according to the 2024/2025 budget, of which 36 percent is allocated to food. More than 60 million people can buy staples such as pasta, vegetable oil and sugar at reduced prices, while at least 10 million more benefit from heavily subsidized bread.

For months, President Abdel Fattah al-Sisi and senior ministers have criticized the subsidy system, arguing that it does not benefit the most vulnerable while placing a heavy burden on state finances.

The International Monetary Fund, which is lending Egypt $8 billion under its latest support program, said in August that a cut in untargeted subsidies would provide more room for social protection and human capital development.

Sisi announced the National Dialogue in 2022 as a way to generate policy debates and recommendations within the boundaries set by the state.

Many of the forum’s recommendations remain unimplemented, although former minister and member of the national dialogue council Gouda Abdel Khalik said its discussion of subsidies signaled that the government intended to move forward with reform.

“The government is determined to cut subsidies and they are using the national dialogue to present it as supported by experts,” Abdel Khalik said.

On Sunday, the National Dialogue issued a statement outlining the potential benefits of moving to cash subsidies.

It is estimated that around 60% of Egyptians live below or close to the poverty line. Many depended on subsidies as prices rose and the currency weakened.

Mohamed Fouad, an economist at the American University in Cairo, said cash subsidies could better target the neediest, but only with clear criteria on how they would be targeted and linked to inflation.