Fresh wage hike, tax cut + social support as inflation bites: President Abdel Fattah El Sisi instructed the government to introduce further measures aimed at alleviating the impact of the economic crisis on vulnerable households. In a statement yesterday, Ittihadiya announced a fresh minimum wage hike for the public sector, a new income tax cut for lower earners and increased payouts to pensioners.

Remember: Inflation accelerated at a record pace in August on the back of ballooning food prices. The urban rate of inflation rose to 37.4% y-o-y from 36.5% the month before, thanks largely to food and beverage prices soaring 71.4% y-o-y.

#1- An income tax break for lower earners: The personal income tax exemption threshold will rise to EGP 45k from EGP 36k currently, reducing wage tax for mns of public- and private-sector employees.

Remember: This is the second time the exemption has been raised this year after the government lifted it from EGP 24k to EGP 36k from the beginning of the fiscal year in July.

#2- Another minimum wage hike: The president directed the government to go ahead with the third public-sector minimum wage hike in a year that will raise monthly minimum salaries to EGP 4k, from EGP 3.5k currently. In addition, public-sector employees and civil servants will see a one-time bonus payout of EGP 600, double the EGP 300 paid out last time around.

Remember: The public-sector minimum wage has climbed almost 50% since July 2022, before which it was set at EGP 2.4k a month. The level was then raised again in October and April.

#3- More support for vulnerable pensioners: Pensioners who receive support under the Takaful and Karama program will see payments increased by 15%, a decision that Ittihadiya said will impact 5 mn families. The government will also pay a EGP 600 exceptional stimulus payment to pensioners “and beneficiaries,” the statement said, without elaborating. The bonus will be paid out to 11 mn people, it said.

#4- Measures to support farmers + journalists: Indebted farmers are in line for support from the Agricultural Bank of Egypt while journalists will receive an increased tech and training allowance.

Costing the measures: The measures are expected to cost around EGP 30 bn, and will be financed from a contingency budget fund, a source at the Finance Ministry told us yesterday. The minimum wage hike will cost around EGP 10 bn while the tax cut will be around EGP 3 bn, they said.

Timing the measures: Ittihadiya did not disclose when the measures could come into effect. In a televised interview on Kelma Akhira last night, House Planning Committee Chair Fakhri El Fiqi suggested that the tax cut will likely be the only measure we’ll have to wait several weeks for, given it has to be voted through the House ( watch, runtime: 11:11). MPs are currently on summer recess and will return to start the new legislative session in October.

Is this enough? In response to show host Lamees El Hadidi’s suggestion that the measures might not be enough to alleviate inflationary pressures, El Fiqi said that the budget for the 2024-2025 fiscal year will likely include further pension and salary increases, and tax changes.

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