BUDGET WATCH- Gov’t mulls increasing subsidy allocations next fiscal year: The government is in talks with the House of Representative to discuss raising allocations for commodity subsidies to at least EGP 96 bn in the FY2020-2021 budget, from EGP 89 bn in the current fiscal year, Supply Minister Ali El Moselhy tells Al Mal. The increase will be necessary to cover the newborns that will be added to the country’s subsidy rolls and to raise each beneficiary’s monthly allowance, El Moselhy said. The government is considering increasing monthly allowances to EGP 200, from EGP 140 currently.

Over five mn newborns born between 2006 and 2015 will be added to the subsidy rolls soon, after being registered last year, El Moselhy said. The addition was projected to increase government spending on subsidies to EGP 91 bn in FY2019-2020, so it’s likely that the ministry will wait to finish purging Kramers from the subsidy rolls first. The purge has so far seen the removal of 8 mn beneficiaries, of whom 1.8 mn were brought back on.

What does this mean for the anticipated switch to cash subsidies? El Moselhy had been working to gauge opinions on the proposed system of doling out cash for food subsidy recipients in place of the current system of in-kind subsidies using ration cards. At the time, he noted that he would first meet with MPs to discuss how to make the move. El Moselhy hasn’t given any signal on when the change would happen but Giza Chamber of Commerce board member Osama El Rifai had said in January it may happen within two months. The Cash Subsidies Act, which would govern this new system, had been sent to the House of Representatives back in July 2019.

The new system would save state coffers some EGP 26.5 bn, or 30-35% of the subsidies bill in its first year, with that figure expected to rise to 40% in the second year of its implementation, sources had suggested.