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Egypt’s $2.5b Package to Help Curb Inflation

Egypt’s $2.5b Package to Help Curb InflationEgypt’s $2.5b Package to Help Curb Inflation

Egypt announced a $2.49 billion package of income tax discounts, bonuses for state employees, increased pension payments and cash subsidies for lower- and middle-income Egyptians to cope with soaring inflation. The package will go into effect July 1, the start of the fiscal year, according to a cabinet statement.

The measures are partially designed to defuse discontent over steep price hikes resulting from reforms introduced in November, including flotation of the Egyptian pound, the introduction of value-added tax and partial lifting of subsidies on fuel, AP reported.

The reforms, part of a deal to secure a $12-billion loan from the International Monetary Fund, sent inflation soaring to more than 30%. More of the subsidies on fuel and electricity are expected to be lifted this summer.

President Abdel Fattah El-Sisi says the reforms, though biting, were the only way to revive the economy, battered by years of turmoil and high-profile terror attacks blamed on militants waging an insurgency in the north of the Sinai Peninsula.

Monday’s package is welcome news to millions of Egyptians because it comes soon after the start of the holy month of Ramadan when observing Muslims refrain from food and drink from dawn to dusk. During the month, Egyptians spend much more than they usually do on food, feasting on large sunset meals along with traditional sweets. Food prices usually inch higher in response to Ramadan’s increased demand.

Despite the difficult economic decisions taken by the government in November, Egyptian citizens have yet to feel any improvement in their living conditions. They are, however, to face another blow with the new rise in prices and the ensuing inflation hike because of the expected cut of subsidies with the start of the new fiscal year on July 1.

 

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