The government has adopted a social protection network to mitigate the potential negative effects of applying the economic reforms agreed upon with the International Monetary Fund (IMF) to put the economy back on track.
The fundamental ideas of the government’s plans depend on expanding the cash support provided to specific categories, in parallel to reducing the other types of subsidies provided to the energy sectors that benefit all Egyptians without discrimination.
The main criticism directed towards this plan is mainly regarding the insufficiency of the existing cash support programmes. The large gaps between the existing social security network programmes cause it to appear disorganised.
Minister of Social Solidarity Ghada Wali said that the spending rates over the social protection programmes are growing immensely, and the government is working on making them more versatile through adding more monetary/cash support programmes.
What is the size of social protection programmes in Egypt?
The social protection budget for the current fiscal year (FY) 2016/2017 is estimated at EGP 12.5bn, which includes EGP 7bn for the social solidarity programme, and EGP 5.5bn for the dignity and solidarity programmes. EGP 4.1bn is directed from the state’s budget, and EGP 1.4bn is a loan from the World Bank, which will be repaid by the state. This reflects the government’s interest in protecting society.
The dignity programme is specified for the elderly population, while the takaful (solidarity) programme is specified for women and their families that are suffering from extreme poverty or have unstable income. The family obtains financial aid through the programme, which includes EGP 60 for students in the primary level of education, EGP 80 for students in preparatory school, and EGP 100 for students in secondary school.
The programme targets to provide financial aid to the poorest in the society—an estimated one and a half million poor families. A year after the programme’s launch the number of beneficiaries reached half of its target goal.
Our ministry and the Ministry of Finance are examining potential alternatives that would increase the number of beneficiaries of the programme; however, we have not yet decided on a final model.
What are the social protection mechanisms implemented by the government to reduce the effects of reform on the poor?
The ministry is implementing several programmes that target reducing poverty in cooperation with other ministries through the solidarity, dignity, and nutritional/food support programmes. The ministry focuses on the poorest 10% of the population.
We provide conditional and unconditional cash support/subsidies to the poor. The number of people who benefit from security pensions is roughly 1.7m families, receiving a total of EGP 609m.
The scholarships provided by the ministry are estimated at EGP 220m annually.
We also offer programmes for impoverished families that have suffered due to disasters, resulting in property loss, injury, death, and funeral expenses.
The total number of beneficiary families for the first batch is an estimated 87,900 families, and the funds spent for these families has amounted to EGP 32m annually.
The number of the beneficiaries of relief aid between July 2015 and June 2016 was roughly 15,700 families, with costs estimated at EGP 38.9m.
Those labeled as in need in Sinai Peninsula obtained EGP 24.2m as exceptional aid, designated for those who have been affected by terrorism, particularly families in Rafah, Al-Arish, and Sheikh Zuweid.
Does the ministry plan to launch new programmes in the coming period? Will there be any partnerships with the private sector?
The ministry is currently studying possibilities for launching the Tamkin wa Tanmya (enabling development) programme, which aims to provide employment opportunities for the poor in various governorates. However, it will not be announced until the financing for the programme is decided upon.
We are getting ready to launch another programme entitled Forsa (opportunity) in the coming days. The programme targets to prepare and qualify young people for the labour market, according to the qualifications needed for available employment opportunities.
We recently established a social responsibility unit with the private sector, and cooperation is underway with a number of companies, including Nestlé, Majid Al Futtaim, and Americana. These partnerships were created in order to qualify and prepare young people according to the requirements of the labour market, as well as providing them with employment opportunities.
What are the latest updates on the NGO draft law, and what are its main features?
We finished the draft of the non-governmental organisation (NGO) law, and it is currently being discussed with 10 of the largest organisations before it will be submitted to the cabinet and forwarded to parliament for discussion and approval.
Article 75 of the constitution states: “All citizens shall have the right to form non-governmental associations and foundations on a democratic basis, which shall acquire legal personality upon notification. Such associations and foundations shall have the right to practice their activities freely, and administrative agencies may not interfere in their affairs or dissolve them, or dissolve their boards of directors or boards of trustees save by a court judgment. The establishment or continuation of non-governmental associations and foundations, whose statutes or activities are secretive or conducted in secret or which are of military or quasi-military nature is prohibited as regulated by law.”
The law obliges all associations and civil institutions to post their budgets, reports, and details of their projects on the central database of the Ministry of Social Solidarity every year, to ensure transparency and accountability.
The modifications will include removing the negative sanctions that prevent freedom and replacing them with administrative penalties or administrative fines, depending on the type of violation.
The law allows NGOs to branch outside of Egypt, after they receive approval from the Ministry of Social Solidarity’s coordination committee.
The law fixes the problems of the entities that practise civil work, and are not subjected to laws that regulate their work and adjust their positions, urging them to modify their systems and adjust their positions according to the provisions of the law within a year from the law’s implementation.
The law allows associations to mobilise financial resources with permission to collect donations and implement projects, then invest its excess revenues to achieve greater financial resources.
The law supports the development of NGO projects in order to activate their role as effective tools in civil society.
There will be new items that target to fix the foreign funding woes currently facing NGOs. A coordinating committee will be formed to be responsible for the activities of foreign institutions and the foreign finances provided to NGOs. The NGO will have the right to obtain foreign finances and register their project with the administration, which can approve or reject their request within 60 days.
Financing will be approved as long as the coordinating committee does not reject it during the 60 days.
How much is the insurance investments ratio in the EGX?
The insurance investments ratio in the Egyptian Exchange (EGX) ranges between 1-2%. There was a study carried out that examined the possibility of increasing these figures; however, the discussions led to them not being increased, given the instability of the EGX.
How much was the investment interest rate on social insurance and pensions during the last FY?
The return on insurance and pensions investments during the last FY was roughly 7.3%.
The size of the pension funds reached roughly EGP 665bn in June.
EGP 315bn as a non-trading sukuk with an average return of 9%, EGP 55bn deposit of the National Investment Bank with a return of 9% annually, EGP 121bn direct investments in securities and financial companies with an annual return estimated at 13%, in addition to EGP 174bn debt of the general treasury represented in the Ministry of Finance.
There are problems facing the insurance system, perhaps the most important one of which is the deficit caused by the current economic situation and its dues in the government and private sector. What is your comment on this?
We are currently examining and preparing financial centres for social insurance funds with an international organisation, and the final report of the organisation confirms a significant deficit in social insurance funds. The reform process should be accelerated.
According to Article 8 of Law 79 of 1975, the insurance funds are guaranteed by the state, and the law will be modified to meet constitutional requirements.
What are the investment policies of the insurance sector?
There is a new investment policy in the insurance sector that is based on three fundamental concepts, which are security, liquidity, and profitability. The ministry is studying similar experiences in the insurance investment fields that achieved success and are admitted internationally as the best administrative forms for insurance and pension investment.
The importance of investment is maintaining the actual value of the excesses of social insurance and protecting them from the societal inflation—that are required for improving reserves and assets to cover the insurance commitments, to support the economy, and to achieve economic investment goals—which requires legislative modification in accordance with the constitution to establish an independent entity to manage and invest the excess social insurance money.
What are the mechanisms that contribute to achieving large insurance investment returns?
The best investments are the ones that achieve higher returns over long-term periods and they are represented in increasing the contribution rates of corporate and bank capital—which enjoys a strong financial position and high profitability—then purchasing these shares from the EGX.
This also includes establishing companies in promising economic sectors, such as cement, fertilisers, petrochemicals, petroleum, and telecommunications and information technology.
These sectors have great opportunities for growth in light of the increased size of demand on strategic commodities and the decline in supply through participating with banks and private sectors.
We invest part of the insurance finances in the real estate sector, insert all the annual appropriations in the national administration for social insurance budget, and repay it monthly to cover the treasury commitments that are spent by the funds to avoid the accumulation of debt on the Ministry of Finance
Is there an intention to increase the rate of return on the sukuk issued by the Ministry of Finance to the Social Insurance Fund?
The ministry seeks to increase the rate of return on sukuk issued by the Ministry of Finance to the Social Insurance Fund to cope with interest prices on Egyptian bills and bonds issued by the Ministry of Finance. These sukuk will be consumed during a suitable period of time which allows them to be repaid annually with a specified ratio from the sukuk value.
Some of the assets owned by the Ministry of Finance will be transferred to the Social Insurance Fund in the form of shares in the companies operating in important economic fields, such as petroleum, electricity, telecommunications, or real estate, or industrial investment lands, or agricultural reclamation projects.
There were attempts to pass a new law for social insurance and pensions in Egypt. What are the latest updates on this?
The Ministry of Finance prepared a new law and passed it in 2010. However, after the 25 January Revolution some segments of society, particularly those attached to syndicates and associations that represent pensioners, were against the law, so the state repealed it.
We are preparing a new law to comply with the 2014 Constitution and with the international and regional conventions in the field of social protection.
The new draft law targets legislative reform of social security systems and pensions, and aims to merge social security laws and current pensions in a unified legislation.
The draft law seeks to remove the current problems resulting from the differences between the basic and variable salaries, unify the insurance subscription into one main salary, and implement a law to rectify the impact of inflation on the real value of wages and pensions. This requires linking wages to a suitable standard variable percentage that maintains the real value of pensions over time, as well as securing a living standard for pension beneficiaries through stipulating the increase of wages, while considering new methods to finance the desired increases.
The law targets to put in place a minimum rate for pensions, calculating the pension according to the specified benefits, and linking the benefits with salaries. The state will remain the financial guarantor of the pensions system.
Enhancing financial and monetary stability is vital to maintaining the real value of pension funds, as well as sustaining the regulatory and structural reforms related to capital markets to enhance growth opportunities and create a powerful insurance industry.