As households face soaring inflation, govt opens rare window for new sign-ups to food subsidy system

As inflation peaks at its highest rate in four years, placing a heavy strain on household budgets, the government opened a rare window this month for families nationwide to sign their children up for food subsidies.

The move is the latest in a belt of temporary relief policies aimed at mitigating the impact of rampant inflation on lower-income households and supplementing distressed public purchasing power after October's devaluation of the Egyptian pound. Yet it represents a deviation from seven years of government efforts toward minimizing spending on food subsidies. 

Over that time, the state has moved away from subsidizing specific goods and toward providing targeted cash support. The window for registering children on subsidy cards has been shut for years, reducing expenditure on the remaining subsidies on specific food products for which 64 million members of the public are still eligible, even as those subsidies have fallen in real value. Last year, the government also put forward plans — derailed by a wheat crisis brought on by Russia's invasion of Ukraine — to cut the bread subsidies which support around 70 million people, and to cap the number of children that families can add to subsidy cards at just two per household. 

But under the December Supply Ministry decision, children aged four and older are now eligible for registration on the cards, as long as they belong to households that qualify for the government's targeted assistance programs, such as Takaful and Karama. Children are also eligible if they are from families that qualify for social security pensions, for the integrated services card for people with disabilities, or are classified as families or widows of security personnel killed in the line of duty, with foster families also able to apply.

“It's a good policy to be used in times of economic crisis and rising inflation to mitigate the effects for the most vulnerable,” said Sherine al-Shawarby, an economics professor at Cairo University and the former deputy finance minister for economic justice, noting that the categorization of eligible groups allows the policy to be targeted. 

A series of shocks to the domestic economy has seen the government compelled to launch successful versions of such emergency support programs.

A two-year, LE100 billion emergency program was implemented in 2020, for example, to mitigate the effects of the coronavirus pandemic, while earlier programs sought to soften the blow of a first currency devaluation in 2016 that came in line with structural adjustment recommendations that accompanied by a $12 billion IMF loan. 

In response to the next global shockwave sparked by Russia's invasion of Ukraine, the government postponed planned increases to electricity and energy tariffs, raised the public sector minimum wage and the ceiling for tax exemption, among other measures.

“Money is injected during crises,” economic researcher Wael Gamal explained to Mada Masr, but in the face of skyrocketing inflation that is projected to continue rising in the first quarter of 2023, it's unclear whether the quantity injected is enough for the scale of the problem. “You can say something has increased, but in reality its value hasn’t.”

And there is no data to measure how programs support household impacts, nor to track trends in household income over recent years, according to both Gamal and to Hania Sholkamy, an anthropology professor at the American University in Cairo's Social Research Center. 

New research into income levels and a readjustment of the poverty line to reflect recent inflation and the deterioration of the pound's value could ultimately reveal, according to Gamal, that more segments of society have seen a blow to their standards of living than are addressed by emergency support packages. 

The government statistics agency suspended its income and expenditure survey in March 2020, though other reports have continued to be issued. At the same time, the number of new children who will be added to the subsidies register is not laid out in the new Supply Ministry decree. Ultimately, said Sholkamy, the emergency addition to the subsidy bill is "necessary." But, she cautioned, "it isn't not enough if the economy continues its deteriorating trend and the major cracks are not fixed."