Egypt’s Ministry of Supply announced on Tuesday that a total of 1.8 million citizens were re-enrolled in its food subsidy program after being removed from the system over the past 8 months.
The announcement came two days after President Abdel Fattah al-Sisi said on his official Facebook page that he “understands the frustrations” of those who have been “negatively impacted by the cuts.”
At the end of 2016, the government announced a program to reform the food subsidy program, which provides subsidized goods like rice, pasta and other items, by removing people whose income was determined to be above a certain threshold. Since then, the standards by which people are made ineligible have been repeatedly amended.
The reform program coincided with Egypt’s 2016 agreement with the International Monetary Fund, which stressed expenditure cuts, including by providing food subsidies only for the “most needy.” Millions of Egyptians have since been removed from the program, even some who should qualify under the government’s stated criteria.
The goal is to curb food subsidy expenses, which make up 27 percent of all subsidies, grant and social benefit expenses in the FY 2019/20 budget.
Tuesday’s announcement that 1.8 million people have been readmitted to the food subsidy program came in the wake of small but significant protests against Sisi’s rule last month amid allegations of corruption, followed by the biggest arrest sweep since the president formally came to power, with over 3,000 people detained. The Public Prosecution’s own inquiry into the protests found that of 1,000 detainees questioned, many cited “poor conditions, some of them economic,” as their reason for demonstrating.
In its Tuesday statement, the Ministry of Supply said that its offices will continue to receive appeals from citizens who have been excluded from the system, adding that anyone who is proven to be eligible for the subsidies will be readded to the program.
Still, the process has been lengthy and exasperating for many of Egypt’s poorest citizens, who find themselves cut off from the subsidy program without justification or explanation and cannot get themselves reinstated.
Ahmed*, a former cashier in the public transportation authority with a pension of less than LE1,000 per month, should qualify to receive subsidized goods from the government. Yet for several months, Ahmed has been unable to receive the subsidies he, his wife, and four of his six children rely on for access to cheap rice, pasta, and other items. Without a working subsidy card, the family cannot even access their bread subsidy, which the government’s new policy was not meant to affect. It is a predicament that is baffling to him.
Ahmed’s troubles began when his ration card was damaged, requiring him to get a replacement. The process of obtaining another card is relatively straightforward, and Ahmed rushed to complete the necessary paperwork, according to his daughter Shaimaa*.
The Ministry of Supply did, in fact, provide Ahmed with a new card, but when he tried to use it, he discovered that it didn’t work. For five months, he filed repeated complaints to try to resolve the problem, to no avail.
While the government does not admit there are random removals, Ahmed’s situation is one of an untold number of cases that remain unresolved in Egypt, where some of the population’s most economically vulnerable citizens are being denied access to a key social safety net, calling into question the credibility of the government slogan, “providing support to those who deserve it.”
Large numbers of citizens who should qualify for government subsidies have been cut out of the system without any clear justification, in what has become known as “random removal.”
But the Ministry of Supply denies the phenomenon completely. Ahmed Kamal, the assistant supply minister and the official spokesperson for the ministry told Mada Masr, “there is no such thing as random removal.”
Shaimaa, who is in her early thirties, is confused over the logic behind the food subsidy program.
Shaimaa’s husband, who has a monthly salary of LE3,500, has a ration card that provides subsidies for both of them, who have a combined monthly income of LE6,000. Yet her father, who receives a monthly pension of less than LE1,000, has inexplicably been cut out of the program.
Similarly, Shaimaa’s brother has also been removed from the subsidy program for no clear reason. As a mobile phone network employee, he was taken off his father’s ration card two years ago when he got married. Given his income level, he should qualify for the food subsidies. Yet all his attempts to obtain a ration card for himself and his family have failed.
Some people incorrectly removed from the program do eventually get reinstated after filing appeals. However, the Ministry of Supply does not compensate people for the period in which they were cut off from access to subsidized goods, even if they were removed from the program in error, the Ministry of Supply spokesperson told Mada Masr.
Moreover, removals can take a long time to reverse, since all “grievances must go through the minister [of supply],” said Fauzi Afifi, the director of the ministry’s General Administration of Cards and Foodstuffs. Though the ministry has reinstated people, Afifi denies that citizens were improperly removed from the food subsidy program in the first place. “All those who have filed complaints against their removals had in fact met the ineligibility criteria.”
Like many others, Shaimaa is also confused by how the food subsidy system deals with young children.
Last year, the Supply Ministry reversed a decision to keep newborns off the program and announced that children born between 2006 and 2015 would be eligible. Yet Shaimaa has been unable to get her two children, ages five and six — both born within that time frame — included in the system, which provides cash support to obtain various goods. The two children currently benefit only from bread subsidies.
Absent legislation that would establish universal policy, the process of registering newborns is opaque and requires administrative approval for all enrollees. In fact, the entire system is based on administrative decisions issued by the government.
Before the most recent decision last year, registration for newborns had been closed since 2011, when the government allowed registration for children born between 1989 and 2005. The last time the government had allowed open enrollment before 2011 was in 1988, according to Afifi.
In the years between each government decision to open registration to new generations, those born into low-income families were deprived of food subsidies.
In its last decision to open registration, the Supply Ministry announced that it would only include newborns who are “most needy.” However, it did not announce the criteria for how it would determine who would qualify. Afifi said these criteria would be announced later, and applications for newborns would be screened accordingly.
In previous declarations, the supply minister suggested that among the criteria for excluding newborns are those in families of more than four people. This may effectively exclude the poorest families from accessing much-needed food subsidies for their children.
According to research on household income and expenditure published at the end of July by the Central Agency for Public Mobilization and Statistics (CAPMAS), the rate of poverty is 75 percent in families larger than 10 people, and 73 percent in families of eight to nine individuals. The poverty rate is 49.3 percent in families of six to seven individuals, 25.9 percent in families of four to five individuals, and just 7.4 percent in families of fewer than four people.
CAPMAS also found that the percentage of expenditure on food and water decreases as living standards increase. According to the report, food and water expenditures make up more than 49 percent of spending among the poorest 10 percent of Egyptians, those whose annual household expenditures come in at LE21,733 or less, and make up just 26 percent of the expenses of the richest 10 percent, those that survey says spend LE60,650 or more per year.
The report also found that the poorest 10 percent of families only spend 15 percent of their total food costs on subsidized goods, whereas subsidized goods represent just 6 percent of total food expenditures for the richest 10 percent of families.
Critics have questioned not only the so-called “random removals” and mistaken de-enrollments from the food subsidy program, but the government’s eligibility criteria itself.
According to various government criteria, a person who earns a government salary in excess of LE12,000 per month, or someone who has more than one 2011 or later model car or a single 2015 or later model car, does not require food subsidies. Similarly, a person who pays LE30,000 a year at a private school for their children, or spends LE800 a month on their cell phone, or consumes electricity in excess of 560,000 kilowatts per month, are to be excluded from the program. Others subject to removal include those who own 10 acres of agricultural land, or those who pay over LE100,000 in annual taxes.
Heba al-Leithy, the supervisor of income and expenditure research at CAPMAS, says that those criteria are not an accurate barometer of standard of living. “The criteria that indicate a certain standard of living in urban areas do not bear the same results in the countryside,” Leithy tells Mada Masr. “For instance, owning a car in an urban area is not necessarily a sign of wealth, which is different from the countryside. Also, those living in urban areas enjoy a greater number of services that are more efficient from those in the countryside. The situation also varies within rural areas. Those living in remote areas, far from the center, are typically less fortunate, so one cannot apply the same criteria to allocate subsidies to them.”
Furthermore, the criteria for exclusion from the food subsidy program are not applied accurately, according to Seif al-Nasr Abdel Wahid, the head of food procurement in Luxor, who engages directly with ration card holders. “For example, there are those who were excluded because they own a car, but in reality they used to own a car but had already sold it,” Abdel Wahid says. He also points to other cases in which people were removed from the program because their phone bill allegedly exceeded LE800, when in reality the bill was under the LE800 threshold.
Removal from the food subsidy program can have serious economic consequences. “Many of those who have lost the subsidies have been clearly affected in terms of their poverty level and living standards,” Abdel Wahid says.
In early 2016, the government announced it would reform the ration card system and begin removing those not eligible. The initial revision removed the names of deceased people and those who had emigrated abroad. However, after several months, the government said it would also begin targeting people whose standard of living was deemed too high to warrant access to subsidized goods.
In early 2017, the supply minister announced that the first phase of the reform program reduced the number of food subsidy beneficiaries from 84 million to 70 million, which is nearly three-quarters of Egypt’s total population, after removing dead people, emigrants and repeated names.
The number of food subsidy recipients who have been removed from the program since that announcement can be roughly inferred from the following diagram, which relies on data from the public budget.
The plan to reform the ration card system coincided with Egypt’s US$12 billion agreement with the IMF, which was signed in November 2016 and included a number of austerity measures to reduce general expenditures and increase revenue. The government had initially begun removing deceased, emigrant and duplicate enrollees earlier in the year, before turning to income-based criteria for de-enrollment in accordance with the IMF agreement.
Prior to this agreement, the state announced in FY 2014/15 a gradual plan to restructure energy subsidies for FY 2014/15, in an effort to curb the fiscal deficit. These are policies that the IMF set as benchmarks for the government to fulfill in order to qualify for disbursal of tranches of the loan.
In a January 2017 report, the IMF said the policies would improve “oversight of state-issued guarantees to ensure that they are justified and do not expose public finances to excessive or unnecessary risk” and that Egyptian authorities “will consider better targeting of food subsidies by improving the current smart card system.”
Despite steep cuts to electricity and petroleum products since FY 2014/15, which drove up the cost of food, the following graph shows that the nominal value of food subsidies has not been changed to compensate for rising real costs.
While the agreement did call for “better targeting” of those to provide food subsidies to, it also directed additional funds to the food subsidy program. “To ease the adjustment process, about 1 percent of GDP in fiscal savings will be directed to additional food subsidies,” the report said.
In July 2017 — the start of FY 2017/18 — Sisi announced that the value of ration support per capita rose from LE21 to LE50 per month for the first four members of the family, and LE25 for any additional family members.
Expenditures on food subsidies as a percentage of GDP did sharply increase at the time, but have since fallen again.
While subsidy expenditures have fluctuated as a percentage of GDP, the real value of the subsidies to beneficiaries has been affected by factors like inflation, which has significantly eroded their value.
The government modified the subsidy system in 2014 to stop providing subsidized goods to citizens, and instead granted them cash subsidies to buy food. Yet it did not set any conditions for increasing cash subsidies in response to inflation.
The idea of switching to cash subsidies was introduced well before 2014, but proponents had called for subsidy value to be tied to inflation. A 2004 study by the Cabinet’s Information and Decision Support Center suggested “the estimate of the annual increase in the value of the subsidies be based on an index of commodity prices that the cash subsidies cover.”
While inflation is one factor that erodes the real value of subsidies, card holders dependent on the program must face another hurdle, according to a prominent member of the Giza grocery and food division in the Federation of Egypt Chambers of Commerce, who spoke to Mada Masr on condition of anonymity: the goods they are allowed to buy through the subsidy program sometimes cost more than goods on the open market.
According to the source, a liter of subsidized olive oil costs up to LE19, compared to LE15 on the open market, and a kilogram of subsidized sugar is LE9.5 versus LE8.5 on the open market.
While some details regarding the government’s plan to exclude certain categories of people from the food subsidy system are known, others remain opaque. What is clear is that 10 members of Shaimaa’s family do not believe the government’s claims that depriving them of food is somehow beneficial to the country.