On 24 June last, Prime Minister Mostafa Madbouly stated that “cash subsidies” will be applied during the 2026-2027 fiscal year and not at the beginning of July 2026, after ration cards have been vetted so that people with high incomes do not receive support from the state, as he described it, while the vetting of ration cards is expected to result in about 12 million citizens leaving the subsidy system, bringing the number of beneficiaries of the cash subsidy programme to about 58 million citizens.
Madbouly had stated on 5 June last that the cash subsidy system will be applied from the 2026-2027 fiscal year, by dividing those entitled to subsidies into tiers according to their level of economic and social need, in order to address the shortcomings of the current subsidy system in a way that ensures social justice and makes use of the resources allocated to subsidies, as he described it.
As the government prepares for this step, some members of the House of Representatives submitted an urgent briefing request to the Prime Minister and the Ministers of Supply, Social Solidarity and Finance regarding the announced shift from in-kind to cash subsidies as of the next fiscal year, amid the failure of government ministers to appear before the House of Representatives to discuss the request.
What raises concern is the high inflation rates, which may erode the real value of the support provided, expected to be EGP 325 (about $6.5), and consequently the loss of its effect in protecting the groups most in need.
As the government seeks to reduce subsidies, Zawia3 carried out a reading of the 2026-2027 budget, which showed that 7 expenditure items in the budget recorded appropriations of “zero pounds”, compared with varying allocations in previous fiscal years, namely: the cost-of-living grant, the child pension, literacy expenses, investment in livestock and aquatic resources, compensation for price differences for contractors, support for public business sector companies, and lending to public sector companies.
Accordingly, the items (support for the cost-of-living grant, support for literacy expenses, support for investment in livestock and aquatic resources, support for public business sector companies) received only “zero pounds” in the 2026-2027 budget, while the child pension was included among the benefits of the “Takaful” conditional cash support after having been a stand-alone item with financial allocations in the budgets of previous fiscal years.
As for support for the cost-of-living grant, it appeared in the 2025-2026 budget with appropriations of EGP 200,000, while support for literacy expenses in the 2025-2026 budget amounted to about EGP 100,000, before their allocations returned to “zero pounds” in the new 2026-2027 budget.
The cost-of-living grant is an exceptional grant approved by the state within social protection packages to support employees of the state administrative apparatus and pensioners in facing inflation and economic conditions. The difference between the “cost-of-living allowance” and the “cost-of-living grant” is that the “allowance” is a financial increase added to the basic or job wage, while the “grant” is paid as cash social support. The Minister of Finance had announced on 26 February of last year an increase in the exceptional cost-of-living allowance, raising it from EGP 600 to EGP 1,000 for all state employees.
The cancellation of the allocations for literacy support in the budget of the current fiscal year 2026-2027 comes as illiteracy rates exceed 16.6% of Egyptians inside the country according to the 2024 statistics, while the rate among illiterate females still exceeds 21.4%, compared with 12% for males, which means that the number of illiterate people, male and female, stands at about 17.8 million, according to Zawia3’s analysis of the official population figures issued by the Central Agency for Public Mobilisation and Statistics.
Are cash subsidies a gateway to abolishing subsidies?
Economist Dr Ahmed Khozaim says that in-kind subsidies differ radically from cash subsidies, explaining that the latter quickly lose their value with any movement in the dollar exchange rate, and stating: “Any rise in the dollar devours the value of cash subsidies, because a move of just one pound in the dollar’s exchange rate is reflected directly in price levels”.
He further tells Zawia3 that in-kind subsidies, under all circumstances, are one of the tools for preserving what remains of the social welfare umbrella for the middle class, considering that the debate under way within the government over the shift from in-kind to cash subsidies ignores more consequential economic facts.
The economist continues that a 1% increase in the interest rate on domestic debt costs the state huge burdens, stating that the interest cost of any foreign loan far exceeds the savings the government might achieve by cutting in-kind subsidies or raising the price of a loaf of bread, and describing this as “a reckless act that puts a hand in citizens’ pockets and increases their living burdens”.
For his part, economist Dr Bilal Shoaib says that the shift from in-kind to cash subsidies is the most appropriate option, even in an economy experiencing high inflation rates, noting that the in-kind subsidy system suffers from the leakage of a large part of in-kind subsidy allocations, and that at least 30% of it does not reach the eligible groups, as evidence that the shift to cash subsidies is more efficient in directing resources, and pointing out that the state has a successful experience in this field with the “Takaful and Karama” programme, which has proven, as he described it, the ability of cash subsidies to reach beneficiaries directly.
No official body has announced that groups ineligible for subsidies represent 30% of those receiving them, but Prime Minister Mostafa Madbouly announced that the government is reviewing the databases of subsidy beneficiaries, as he pointed to cases of families that receive subsidies while enjoying high living standards, living in luxurious compounds, sending their children to international schools and universities and owning luxury cars, according to his statements.
Shoaib tells Zawia3 that applying cash subsidies will give the state, in his view, a greater ability to tighten oversight and governance and to reduce the cost of monitoring the subsidy system, allowing government agencies to focus on planning and management instead of tracking the leakage or misuse of subsidies, by making use of the digital infrastructure he described as “good”.
On linking the value of cash subsidies to inflation rates, Shoaib says that this principle is already applied, in a way he described as “indirect”, in the current subsidy system; in his view, subsidy allocations rose from about EGP 160 billion to about EGP 178 billion as prices increased, which reflects, from his point of view, the general budget’s responsiveness to changes in inflation, and he believes that the shift to cash subsidies will not differ in essence from “in-kind” subsidies in terms of increasing allocations when needed.
According to the analytical statement of the 2026-2027 budget, allocations for ration subsidies alone amounted to EGP 178.3 billion, whereas they were EGP 160 billion in the budget of the 2025-2026 fiscal year.
For his part, an economic researcher familiar with the subsidy file at the Cabinet describes the shift from in-kind to cash subsidies at present as “the back door to abolishing subsidies”, considering that the economic conditions Egypt is going through do not allow this shift to be applied at all, given rising poverty and inflation rates and the instability of the currency’s value, and noting that the poverty rate, according to the latest official statistics, exceeds 30% of the population, which indicates that the shift to cash subsidies carries social and economic risks.
Since 2020, the Central Agency for Public Mobilisation and Statistics has not issued the Income and Expenditure Survey, whose last edition put the poverty rate among Egyptians at about 29.7%, while estimates indicate that the poverty rate rose to 33% of the population by the end of 2022, and economists believe that the poverty rate in Egypt is close to 40% of the population.
The researcher, who declined to be named for reasons of professional safety, tells Zawia3 that the value of the cash sums provided as cash subsidies erodes over time due to inflation and declining purchasing power, while subsidised goods remain more capable of meeting households’ basic needs.
He details that giving a citizen support of about EGP 100, for example, may be enough to buy a quantity of rice now, while that figure will be enough to buy only half the quantity a year from now, and only a quarter of the quantity after two years, and so on.
He continues that giving citizens a fixed cash sum may look like a continuation of subsidies “on paper”, as he described it, but in reality it is a gradual abolition of subsidies by indirect means, noting that cash subsidies under current conditions will increase households’ living burdens and raise poverty rates, even if this increase is not reflected in official statistics, and noting that published official data do not always reflect the full picture of social conditions.
He points out that the priority now must be to expand the social protection umbrella and strengthen support for poor groups, with reducing subsidies or fully shifting to cash subsidies to be reconsidered when poverty rates fall to levels ranging between 15% and 20% of the population and economic conditions become more stable.
The citizen who has no peace of mind about his livelihood
Dr Ahmed Khozaim explains that the government has not been able to control inflation rates, noting that even if it resorts to raising interest rates to curb inflation, the government itself remains the largest debtor to banks, whether through domestic debt in Egyptian pounds or foreign debt.
He criticises what he described as “the mindset of a government of levies”, considering that the successive increases in the prices of electricity, fuel and other services, without matching growth in incomes or the provision of job opportunities for young people, are continuously weakening the middle class.
He adds that the “economic reform programme” that began on 3 November 2016 witnessed, according to him, a rise in poverty rates from about 25% to more than 60% according to the World Bank, which means, in his words, a widening circle of poverty against a shrinking middle class.
According to the Central Agency for Public Mobilisation and Statistics, poverty rates reached 27.8% of the population in 2015, when the income of an individual in this segment was less than EGP 482 per month, while the World Bank said in 2025 that about 66.2% of Egypt’s population live below the global poverty line of $6.8 per day on a 2019 basis, equivalent to EGP 10,000 per month.
For her part, professor of political sociology Dr Hoda Zakaria says that any subsidy policy proceeds from guaranteeing the minimum of a dignified life for the citizen, since, as she put it, the citizen who strives to earn a daily living must be reassured that the state provides his basic needs so that he can continue to lead a stable life.
She tells Zawia3 that the House of Representatives, as the representative of citizens, has a duty to convey citizens’ concerns to the government, noting that the briefing requests and interpellations submitted to the government reflect real social concerns relating to citizens’ ability to cope with the burdens of living, especially as citizens receive a cash sum that quickly loses its value as prices rise, which upsets the balance between income and spending and leaves subsidies unable to achieve their purpose.
The professor of political sociology continues that the success of the cash subsidy system should be measured by its ability to give citizens a sense of economic security, noting that the value of cash support, ranging between EGP 300 and EGP 350 per eligible person, is not economically effective as inflation rates continue to rise, and explaining that the value of support relates to the purchasing power of the sum and the extent to which it meets citizens’ basic needs.
She states that reassuring citizens economically is reflected directly in social stability and general satisfaction, warning that widening economic pressures may push some individuals towards negative or criminal behaviour, as she described it, because they feel unable to meet their basic needs, which makes providing a minimum of livelihood security a societal issue that goes beyond its economic dimension.
The professor of political sociology rejects reducing the debate on subsidies to accusations that the economy is biased towards the socialist model, noting that this harms social peace and diverts the debate from the core issue of providing citizens with a dignified and secure life.
Inflation is eating subsidies “in plain sight”
Dr Ahmed Khozaim warns of continued inflationary pressures, pointing out that the exit of hot money, which hovers around $45 billion, will lead to major pressure on the exchange rate, and explaining that the exit of every $1 billion of these flows may raise the dollar’s exchange rate against the pound by about one pound, which will be reflected directly in prices and lead to a new wave of inflation, something the government has no control over.
During January last, non-residents’ investments in local-currency government debt instruments recorded $38.1 billion, while the volume of investments reached about EGP 1.969 trillion (EGP 39.5 billion) by the end of March last.
Khozaim considers that the government handles the economic file from a narrow perspective, saying that it lacks a social dimension and resorts to measures aimed at increasing revenue without regard for citizens, such as rationing electricity consumption, installing coded meters and other measures aimed at compensating for losses or collecting additional resources, and the latest evidence of its failure, according to the economist, is the decision to penalise cafés and restaurants operating beyond the set hours with higher electricity prices, noting that the government focuses only on imposing new burdens.
On 1 July 2026, Prime Minister Mostafa Madbouly announced a 20% increase on electricity consumption for restaurants and cafés that continue operating after official closing times.
The economist details that the government is not held accountable for maximising revenue from the major economic sectors Egypt possesses that are capable of generating large revenues, including the agricultural economy, the industrial economy with the mining, quarrying and extractive wealth it encompasses, the maritime economy and the tourism economy, as well as the services economy linked to 54 countries.
He adds that no one holds the government accountable for weak revenues, at a time when it relies mainly on Suez Canal income, remittances from Egyptians abroad and tourism revenues, while it is good at nothing but borrowing, as he described it, noting that citizens are the ones who ultimately bear the cost of repaying those loans.
Khozaim believes that the crisis does not concern in-kind subsidies as such but the way decisions are made, describing the shift to cash subsidies as “a distorting oversimplification”, because any cash sums citizens receive will quickly erode with any new wave of price rises, so that their real value becomes “as if it never existed”, according to his statement.
In response, Dr Bilal Shoaib rejects the claim that cash subsidies could fuel inflation, noting that the state will save large sums as a result of eliminating the leakage of subsidies and their reaching ineligible people, which allows these resources to be redirected to more efficient areas of spending, in his view, while Shoaib does not see the concerns raised on that point as resting on strong justifications.
He believes that the proposed value of support, around EGP 300 and EGP 350 per eligible individual, is appropriate under current conditions, with the possibility of increasing it in the future if economic conditions require, if the House of Representatives demands an increase in support should inflation rates rise significantly, but adjusting the allocations, according to the economist, is linked to the annual reviews of the budget and the state’s fiscal policies.
He expects that evaluating the experience of the shift to cash subsidies will need a period of no less than a full year, explaining that the success of the experience depends on announcing clear criteria for identifying those eligible and excluding those ineligible, especially since the current subsidy system includes some groups that do not meet the eligibility conditions, by setting precise criteria that determine who is entitled to subsidies to ensure that resources reach the groups most in need and to maximise the efficiency of public spending, as he described it.
Keeping in-kind subsidies “flaws and all”
The economic researcher at the Cabinet says that economic literature considers subsidies one of the distortions that are preferably limited because part of them leaks to ineligible people, but he believes that the Egyptian case is an exception, since keeping in-kind subsidies despite their shortcomings, as he described it, remains better than shifting to cash subsidies amid continuously rising prices, stating that the current value of subsidies represents a limited share of the general budget and does not warrant abandoning them at this time.
He adds that low-income citizens bear growing burdens as a result of the rising costs of electricity, water, services, transport and other things, noting that keeping in-kind subsidies provides them with a minimum of basic needs even with some shortcomings in the system.
The economic researcher believes that any talk of abolishing subsidies, or even shifting to cash subsidies, must be preceded by a tangible improvement in income levels and the stabilisation of economic conditions for an appropriate period of no less than 5 years, so that households regain their ability to cope with the burdens of living, warning against applying cash subsidies under current conditions, as this may increase inflationary pressures while citizens suffer from the rising cost of living.
He explains that the free economy, in principle, does not favour subsidies, but he points out that even purely capitalist economies apply forms of social protection, citing the food stamp programmes provided to low-income groups in the United States, and considering that countries with high rates of poverty and unemployment are more in need of continued subsidy policies.
He adds that subsidies should be evaluated according to the goods and services they provide to citizens and their ability to meet basic needs, not according to their cash value, since what matters is purchasing power and not the number of pounds entering the citizen’s pocket, explaining that linking the minimum wage to inflation rates will preserve the real value of cash subsidies over time.
He also describes the value of cash subsidies of between EGP 300 and EGP 350 per eligible person as “unfair if not linked to inflation”, reasoning that their purchasing power will gradually decline as prices rise, and pointing out that the argument about subsidies not reaching those entitled to them only calls for activating an accurate database that excludes ineligible people and ensures that subsidies reach the groups most in need, rather than replacing the whole system.
The shift from in-kind to cash subsidies is not about the efficiency of public spending but about the state’s ability to protect the groups most in need in the face of waves of inflation and the rising cost of living, amid an intention that seems clear, almost declaring outright that this shift will open a new door to the erosion of social protection.
