Tuesday,20 November, 2018
Current issue | Issue 1330, (2 - 8 February 2017)
Tuesday,20 November, 2018
Issue 1330, (2 - 8 February 2017)

Ahram Weekly

Just scraping by

Calls to increase salaries in line with Egypt’s skyrocketing consumer prices

Employees lining up to cash their monthly salaries
Employees lining up to cash their monthly salaries

“The prices of everything have tripled, and I have no clue how we will continue to get by,” Manal Mahmoud, a 38-year-old mother of two in Cairo, said this week.

The price hikes have become noticeable on nearly all local and imported products, fuelled by the tough economic measures that have been taken over recent months. The floatation of the Egyptian pound in November, the application of the 13 per cent value-added tax (VAT) in September, and the cuts to fuel subsidies have all put many people in an unenviable situation.

Mahmoud, formerly a housewife, has started looking for a job to help generate more income for her family. “Sitting at home with the kids is a luxury I can no longer afford,” she said.

In response to the rising prices, a campaign was launched recently called awzeen neesh, or “We Want to Live”, calling for salaries to be raised across the board to help meet the recent economic measures.

Media coordinator of the campaign Mona Ahmed told Al-Ahram Weekly that because of the floatation of the pound an income of LE1,200 has now been reduced to the equivalent of LE600, meaning that there was a strong argument for salary rises.

Egypt’s annual core inflation rate jumped to 25.86 per cent in December from 20.73 per cent in November. The rate is calculated by the Central Bank of Egypt (CBE) and discounts volatile items such as fruit and vegetables.

IMF Mission Chief for Egypt Chris Jarvis said in a recent online press conference that Egypt’s headline inflation rates were “higher than expected”. As a result, several private-sector Egyptian and international companies operating in Egypt have raised the salaries of their employees, prompting speculation that the government might pursue the same approach in the public sector.

Sherine Alaaeddin, a 24-year-old video editor, said the company she works for had sent an e-mail out to employees after the floatation, announcing 15 per cent increases in salaries effective in January.

But these raises are not enough, according to Walid Hassan, who works for a food manufacturer in Cairo. “They are increasing the usual annual salary raises only slightly, and this is not enough to cope with the new situation,” he said.

However, other companies have not taken any action. Ahmed Ghandour, a 27-year-old engineer who works for a multinational company, said that he and his colleagues had spoken with his company’s HR department about a raise after the price increases.

 “But we have not had any response,” he said.

Advisor to the Minister of Finance Mosbah Kotb told the Weekly that the ministry had not finalised the salary budget for the 2017-18 fiscal year. “The budget will be allocated according to anticipated revenues and planned expenditures,” Kotb said.

The allocation for public-sector wages and pensions in 2016-17 is LE228.13 billion, or 24.4 per cent of total government spending. This sum finances the salaries of 5.9 million employees working in the public sector, according to the Finance Ministry. It is 4.6 per cent more than the LE218 billion allocated in 2015-16.

The higher spending on wages came after the government began applying a minimum wage of LE1,200 per month for public-sector employees in Egypt in January 2014, after several calls for this to be done after the 25 January Revolution.

Dean of the Faculty of Economic and Political Science at Cairo University Hala Al-Said told the Weekly that introducing a higher minimum wage would create “an additional burden” on the budget and would fuel inflation.

“It is important that wages are kept restrained if inflation is to be contained,” Jarvis also said during his online conference. He explained that higher wages would translate into higher deficits if in the public sector and higher prices if in the private sector, both of which would feed inflation.

“We know that raising the minimum wage would drive up inflation, but we are still calling for this as a temporary solution to protect people,” Mona Ahmed of the campaign said.

“An alternative solution would be to increase tax exemptions, as this would help revitalise demand,” Al-Said suggested.

Last week, the parliament approved a proposal submitted by MP and head of the Federation of Egyptian Industries Mohamed Al-Sewedi to increase the income tax exemption limit from LE13,500 to LE24,000.

“We can continue on current incomes, if the government makes it up to us by providing better health and education services,” Ahmed Abdel-Azim, a 34-year-old accountant in Cairo, said.

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