Government earmarks extra EGP 46 bn for social security spending to combat price increases
The Ismail government has signed off on an EGP 46 bn social security package for FY2017-18, according to a statement from the Finance Ministry. The package includes a 15% increase in pensions at a cost to the state of EGP 20 bn in a bid to cushion pensioners from the worst of record-high inflation, Social Solidarity Minister Ghada Wali told Al Masry Al Youm. Cash transfers from the Takaful and Karama programs will increase by about EGP 100 per household as the government earmarked an extra EGP 2.25 bn for them, she added. Finance Minister Amr El Garhy says the government will also disburse two bonuses to state employees who are subject to the Civil Service Act, while state employees not regulated by it will get one bonus payment.
The Ismail cabinet also approved raising the minimum income tax threshold to EGP 7,200 a year from EGP 6,500, Vice Minister of Finance Amr El Monayer told a news conference on Monday, according to Reuters and AMAY. That means individuals earning less than 7,200 a year (or half the minimum wage) will not be subject to income tax.
The state will also provide tax breaks to citizens, with the size of break falling the higher up the income ladder you are. Those making between the minimum threshold of EGP 7,200 and EGP 30,000 will see their taxes discounted by 80%. Those making EGP 30,000-45,000 will receive a 40% break, while those making up to EGP 250K will be getting 5% off their tax bills, said El Monayer.
The increased spending was taken into consideration when drafting the FY2017-18 budget, said Vice Minister of Finance Ahmed Kouchouk, who added that the government is still projecting a deficit of 9% of GDP during the year, Bloomberg reports. Some elements of the package will remain outside the budget and will require separate legislation, El Garhy noted, saying these have to do with tax benefits, according to Al Borsa. Bloomberg, meanwhile, says “the package, excluding the cash subsidy raise, requires parliament approval.”
The story is getting widespread pickup outside of Egypt thanks to coverage by Reuters and Bloomberg (above) and a take by the Associated Press.
Uh, how much, exactly, is the package worth? The release from the Finance Ministry puts it at EGP 46 bn. They’re the folks who foot the bill, so we’re going with them. But Bloomberg is reporting EGP 45 bn, Reuters is saying EGP 43 and we’ve seen EGP 43 in some domestic press outlets.