Egypt has announced a 50 percent increase in the monthly minimum wage to alleviate economic pressures on citizens amidst ongoing currency devaluation concerns. The wage hike that will take effect in March is part of the International Monetary Fund‘s (IMF) comprehensive social protection package.
Policy measures
Egypt finds itself in a precarious economic situation, with analysts closely monitoring the stability of its currency. Recent speculation regarding a potential currency devaluation prompted a 200 basis point interest rate hike by Egypt’s central bank. While the official exchange rate has remained fixed, the black market witnessed significant fluctuations, raising concerns about currency stability. This prompted the government of Egypt to increase the minimum wage to decrease the effects of economic pressures on citizens.
In response to economic pressures, President Abdel Fattah El-Sisi has implemented several measures to support Egyptian citizens. Alongside the 50 percent increase in the monthly minimum wage, Egypt’s government has also raised the tax threshold by 33 percent, from EGP45,000 ($1456.36) to EGP60,000 ($1941.82), benefiting employees across both the public and private sectors. Additionally, Egypt’s state workers will see an increase in their wages by a minimum of EGP1,000 ($32.36) to EGP1,200 ($38.84) per month starting in March.
IMF negotiations
Egypt’s economic reform efforts, including the minimum wage increase, are highly dependent on negotiations with the IMF. The $3 billion loan agreement that Egypt signed in December 2022 aims to address the country’s economic challenges. Moreover, it includes commitments to adopt a flexible exchange rate system and reduce state intervention in the economy. While Egypt has made progress in discussions with the IMF, disbursements under the program are subject to eight reviews. The IMF scheduled the first and second reviews but they were postponed as the exchange rate has remained steady.
Read: Egypt’s trade deficit declines to $36.9 billion in 2023
Challenges and response
Despite efforts to stabilize the economy through various measures including the minimum wage hike, Egypt continues to face challenges due to regional tensions. The geopolitical landscape has disrupted tourism and shipping through the Suez Canal. However, the recent increase in prices of essential services underscores the government’s attempts to manage budget deficits and stabilize the economy amid ongoing crises.
The decision to raise the minimum wage and implement a comprehensive social protection package reflects Egypt’s commitment to addressing economic challenges and supporting its citizens amidst uncertainty. As negotiations with the IMF progress and the country navigates geopolitical pressures, the implementation of effective economic policies will be crucial in fostering stability and promoting sustainable growth in Egypt.
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