Egypt Raises Minimum Wage by 50% in ‘Urgent’ Economic Package

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Egyptian President Abdel Fattah al-Sisi has announced a significant increase in the monthly minimum wage by 50%, raising it to 6,000 pounds ($194), effective from March. This decision is part of a broader 180 billion pound “urgent social protection package,” as stated by the presidency on Wednesday.

The timing of this move coincides with Egypt being under close observation for a potential devaluation of its currency. Last week, the central bank implemented a 200 basis point interest rate hike, leading some analysts to speculate about a looming devaluation.

The Egyptian pound, which has been fixed at 30.85 to the dollar since March, experienced volatility earlier this month, reaching as low as 71 to the dollar in the black market. However, it has since strengthened to around 60.

In addition to the minimum wage increase, President Sisi has instructed the government to raise the tax threshold by 33%, from 45,000 pounds to 60,000 pounds, applicable to all employees in both the public and private sectors.

Furthermore, the social package includes additional wage hikes for state workers, ranging from 1,000 to 1,200 pounds per month, starting in March.

The International Monetary Fund (IMF) announced on Thursday that it had reached an agreement with Egypt on key policy components of an economic reform program, signaling progress towards enhancing a $3 billion loan agreement. Egypt has been engaged in talks with the IMF over the past two weeks to bolster and expand the existing loan agreement signed in December 2022.

The agreement entails commitments from Egypt to transition to a flexible exchange rate regime, reduce the state’s role in the economy, and promote private sector growth. However, disbursements under the program hinge on eight reviews, with the first two postponed last year due to stable exchange rates.

The IMF mission chief for Egypt, Ivanna Vladkova Hollar, noted “excellent progress” in discussions regarding a comprehensive policy package necessary to reach a Staff Level Agreement for the combined first and second reviews.

Amidst economic challenges, the Egyptian government increased the prices of various services in January, including electricity, metro tickets, and telecommunication services, aiming to address budget deficits.

The country’s economy has faced additional strains from the Gaza crisis, impacting tourism and reducing shipping through the Suez Canal, a vital source of foreign currency. Despite a slight rise in net foreign reserves to $35.25 billion in January, annual headline inflation declined to 33.7% in December, compared to 34.6% in November and a peak of 38.0% in September, according to the state statistics agency CAPMAS.