The EconomistAugust 10th 2019 Middle East & Africa 412 city divided by sect and class, they also lead
to unexpected encounters. Your corre-
spondent has heard drivers recite tradi-
tional Arab poetry and a Hizbullah fighter
recount a trip to Syria to fightisis.
The system does have its downsides.
Every ride is a gamble. Some drivers deviate
from planned routes in search of extra
fares, making commuting times unpre-
dictable. (The definition of hell, some joke,
is to be in an empty service taxi, behind a
full one.) Female passengers often opt for
Uber to avoid harassment. Marwan Fayyad,
the head of the local taxi-driver syndicate,
laments that poor regulation has allowed
forged licence plates and unlicensed driv-
ers to proliferate, making it harder for reg-
istered service drivers to make ends meet.
Still, a little chaos will have to re-
main—in many ways, the lack of regula-
tion is the central appeal of service taxis.
“As a service driver, you’re free,” says one
who refuses to use Uber. “No one is in
charge of you—you’re in charge.” 7
E
xcept forthe glow of a mobile phone
behind the watermelons, the fruit-and-
vegetable shop on a busy Cairo street looks
deserted. The owner says his wares are 25%
more expensive than last summer. As
prices rise, buyers skimp: regulars who
used to buy a kilogram of fruit now settle
for half. He keeps the lights off between
shoppers to save a few pounds. There are
no lights either at the butcher’s next door,
who reckons revenues are down by 20%. “I
sell a lot of bones for soup,” he says.
Last year Egypt vowed to halve poverty
by 2020 and eliminate it by 2030. It is going
in the wrong direction. On July 29th the na-
tional statistics agency released a long-de-
layed report on household finances. It
found that 33% of Egypt’s 99m people were
classified as poor last year, up from 28% in- Even that dismal finding may not be
dismal enough. The government has fixed
the official poverty line at just 736 pounds
($45) a month, a figure that many econo-
mists say is too low. The World Bank said in
April that 60% of Egyptians were “either
poor or vulnerable”.
The numbers are a stinging assessment
of the economic reforms overseen by the
president, Abdel-Fattah al-Sisi. Backed by
the imf, which approved a $12bn loan in
2016, his government cut fuel subsidies, let
the currency depreciate and imposed a 14%
value-added tax. These gave Egypt a prim-
ary surplus and cut its deficit to 8.3% of
gdp, from 12.5% three years ago.
But macroeconomic gains came at the
expense of Egyptians themselves. Cuts to
fuel subsidies have pushed up transport
costs. For an Egyptian on the official pover-
ty line, a short daily trip on Cairo’s metro
would now consume 25% of their monthly
income. Average household expenditures
have increased by 43% since 2015. Income
rose by just 33% during the same period,
while household debt to banks jumped by
58%. Adjusted for inflation, which peaked
at 33% in 2017 (see chart), Egyptians are
earning less than they did three years ago.
Though inflation has cooled, the imf
expects it to remain in double digits until at
least 2021. The poorest Egyptians, who
spend up to 48% of their income to eat, are
hardest hit. Meat is an unaffordable luxury:
a kilo of beef costs 9% of an average week’s
pay. Even a humble plate of koshari, the
mixture of lentils, chickpeas, rice and pas-
ta that is a staple lunch for many, is becom-
ing expensive. A small plate used to cost
three pounds. Now restaurants charge at
least five, and often more.Add to that a government determined to
squeeze every pound out of its citizens. The
price of almost every service, from driving
licences to gun permits, has gone up. Pub-
lic-school fees have jumped by 20-50%.
Taxi drivers at the airport grouse about new
charges: 2,000 pounds a month for a per-
mit, plus parking fees that have quadru-
pled. Their passengers are being squeezed
too, with a new $25 departure tax. For busi-
nesses, there is a proposed 0.25% levy on
revenue that would be used to fund a new
national health-care scheme.
Many of these changes are long over-
due. (Fuel subsidies were regressive, ineffi-
cient and unaffordable; hospitals need in-
vestment.) But Mr Sisi’s government seems
oblivious to their impact on the poor. It
points to the expanding economy—a 5.6%
rise in gdp last year gave Egypt the fastest
growth in the Middle East. But the jump is
mostly due to a boom in oil and gas. Other
sectors look stagnant. Though jobs are be-
ing created, many are in low-wage or infor-
mal sectors.
Subsidies were the heart of Egypt’s so-
cial safety-net. Nothing has adequately re-
placed them. The main cash-transfer
schemes for the poor, Takaful and Karama,
cover an estimated 9.4m people, less than
10% of the population. A monthly payment
to families with children barely covers a tin
of baby formula. Ration cards give access to
cut-rate staples, but no one can live on
cooking oil and rice alone.
Faced with bad news, the government
has done what it does best: blame the mes-
senger. The poverty report should have
been released in February. It was delayed
twice, with the authors told to revise their
findings. Mr Sisi needs to move beyond fis-
cal reforms by cutting red tape, removing
barriers to trade, and pushing the army out
of business. Unless he does this, the only
way for him to meet his goals on poverty
will be to define it out of existence. 7CAIRO
Three years of impressive reforms have
come with a costEgypt’s austerityPoverty on the Nile
Price shocksSource: Central Bank of EgyptEgypt, consumer prices
% increase on a year earlier2015 16 17 18 1905101520253035Bearing the burden of reform