Egyptian President Abdel Fattah El Sisi increased the minimum wage for public sector workers by 20 per cent and approved salary increases worth 37 billion Egyptian pounds ($2.35bn) as the Arab world's most populous country looks to stimulate economic growth.
The national minimum wage for public sector workers will increase to 2,400 pounds ($153) a month from 2,000 pounds currently, presidential spokesman Bassam Rady said in a statement.
The directives are among several issued by the president following a meeting on Monday with Prime Minister Mostafa Madbouly and Minister of Finance Mohamed Maait to discuss the draft budget for fiscal year 2021-2022, which begins on July 1.
Egypt is the only country in Mena whose economy grew last year, according to the World Bank. However, it has not been immune to the pandemic's impact with its tourism sector particularly hard hit as movement restrictions were enforced. Unemployment spiked to 9.6 per cent in the second quarter of 2020 before decreasing to 7.3 per cent in the third quarter, according to the International Monetary Fund.
“The unusually higher minimum wage increase decision for this year was driven by the government’s perception and consciousness of the street’s pulse,” said Esmat Kamel, director of the Centre for Global Business Excellence at Cairo-based think tank Global Trade Matters.
“It also reflects a strong signal from the government's side to being committed to taking action to ease the additional burden off the citizen's shoulders, especially during the pandemic and the repercussions it has caused on low-income workers,” said Ms Kamel, who also teaches economics at October University for Modern Sciences and Arts.
Egypt increased its minimum wage to 2,000 pounds from 1,200 pounds in 2019. Prior to that, public sector wages had not increased for five years.
Pensions will increase by 13 per cent at a cost of 31bn pounds, outpacing inflation at 5.1 per cent. Around 10.5 million citizens will benefit, the head of the National Authority for Social Insurance Gamal Awad told Egyptian television station Sada Elbalad.
Other bonuses approved by the president include 17bn pounds in incentives and two allowances at a cost of 7.5bn pounds, one at a rate of 7 per cent of the basic salary for employees subject to the Civil Service Law and the other at 13 per cent for those not subject to the law.
Employees who meet promotion requirements on June 30 will receive salary increases at an estimated cost of 1bn pounds.
Finally, workers who will be transferred to the New Administrative Capital will be rewarded with a total financial incentive of about 1.5bn pounds. The new capital city, 45 kilometres east of Cairo, which has been under construction since 2015, is expected to be completed this year.
The draft budget aims to reduce Egypt's total deficit to about 6.6 per cent of GDP and achieve an initial surplus of 1.5 per cent of GDP.
Egypt’s economy grew by an annualised 1.35 per cent in the last half of 2020 and by 2 per cent in the final quarter, Minister of Planning and Economic Development Hala El Said said last week. She expects it to grow by 2.8 per cent in the first quarter of 2021 and 5.3 per cent in the second quarter.
The minimum wage for the public sector is set by the National Council for Wages, which was established in 2003 to ensure that salaries cover the cost of living. It has yet to set a minimum wage for the private sector.
“Raising the minimum wage will enable low-income workers to raise their consumption spending,” Ms Kamel said. “This, in turn, will decrease income inequalities, cause a multiplier effect on the economy and trigger knock-on effects on many other sectors to help in stimulating economic growth.”