The government is mulling increasing its public sector wage budget past EGP 700 bn for the first time, coming in at around EGP 750 bn in the next fiscal year versus EGP 679.1 bn in the current FY, a senior government official tells EnterpriseAM.

Driving the uptick in planned spentading on wages will be salary increases for all employee brackets, including raising the public sector minimum wage to EGP 8k-10k from the current EGP 7k, we were told. The proposal signals that the government is anticipating a significant spike in inflationary pressures stemming from the ongoing war and that it needs to think ahead to guard against a potentially punishing rise in prices for low-income consumers.

Why this matters: Crossing the EGP 700 bn threshold for wages represented a sizable expansion of the state’s planned spending. While necessary for supporting Egyptian workers through a difficult period, this increased spending will test the government’s commitment to its deficit reduction goals, especially as interest rates now look set to stay higher than originally planned.

More money will also be set aside for education and healthcare, with the new budget expected to entail support for workers already in the sector as well as new appointments to address shortages and improve services, the source added.

The private sector is expected to follow suit when the National Wages Council meets next month to decide on a new minimum wage for private sector workers, council member Alaa El Sakty tells us. El Sakty expects the minimum wage to increase to EGP 8k from the current EGP 7k.

Because many businesses are feeling the pinch right now, the council plans to offer exemptions for distressed sectors, similar to what they did during Covid-19, El Sakty notes. However, he warns that much of the private sector can only stomach these mandatory pay bumps if the government steps in to help with lower interest rates on project loans and deferred state obligations.

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