I decided to swim against the tide that accompanied the flotation of the Egyptian pound, the rumbling flood of comments on social media networks and opinion articles that filled newspapers and websites. Everyone is talking about the flotation and cuts to fuel subsidies, some people understand what they are talking about while others are driven by sources for which Allah has sent down no authority. Surprisingly, I discovered that we have 90 million economists and financial analysts created by social networks and electronic media.
I will address the consequences of the flotation by arguing that the difficult economic decisions made in Egypt can be alleviated by using social safety nets.
According to the United Nations Economic and Social Commission for Western Asia, the concept of a social safety net can be defined as “a group of inter-related mechanisms and activities used to achieve stability for individuals and groups, and to free human beings from deprivation.” So, social safety nets aim to support stability and social cohesion, and to achieve balance between communities.
Social safety can be achieved by providing for the basic needs of those who cannot otherwise achieve it on their own. They must be provided with productive loans and be offered better education and training. By doing so the social problems that threaten social stability, such as unemployment, poverty, and marginalisation, can be mitigated. Typically, social safety nets are implemented prior to any large economic paradigm shift.
All countries that wish to have an effective social safety net must use its legal system and adopt mandatory regulations that guarantee social protection for its citizens from societal risks. Such systems offer financial aid, in-kind assistance, and social insurance. The state should play that role.
While there are many different ways in which a state can introduce such programmes, we will discuss one which is better suited for Egypt in its current state: a permanent social safety net. This approach aims to provide enduring social protection for its citizens, usually categorised by long-term strategies aimed at providing social protection for those who truly need it. It is also meant to provide social insurance against a number of risk factors, such as unemployment, illness, ageing, and poverty by allocating the required resources to the most destitute and vulnerable groups in society.
Social safety nets, however, require large amounts of financial investment and permanent sources of funding for projects and programmes. These projects and programmes must in turn be periodically evaluated for their social and economic returns, to ensure that they fulfil their function and ameliorate the issues they were created to combat.
Social safety nets play an active role in the global effort to combat extreme poverty. The World Bank’s database shows that safety nets in developing countries save nearly 50 million people from extreme poverty annually.
In Egypt, the social safety net relies on a database built around citizen registration using national ID cards. This database is updated through many national databases that collect information on births, deaths, marriage, and divorce.
It is worth noting that Egypt received a $400m loan from the International Bank for Construction and Development (IRBD) in December 2015, meant to provide financial support for social protection projects. A review of the loan showed that by October Egypt has received $206.21m; however, the bank’s website does not provide information regarding which specific projects have thus far been supported by the loan.
The loan is aimed at created a support programme of “solidarity and dignity” in cooperation with the ministries of social solidarity and planning. The programme will support socioeconomically vulnerable families that are unable to meet their basic needs. It aims to ensure their children’s rights to health and education, while also supporting those that are unable to work. The programme will focus on the most impoverished provinces based on income and expenditure statistics and poverty maps.
The state had already begun implementing social safety nets since 2015. It is worrying, however, that not only is there insufficient data regarding the ways in which the loan has been spent, but there has also not been any social and economic evaluations of the recipient programmes and projects.
We have received roughly 51% of the total loan, and I wonder if it will be enough to heal the rifts that have resulted from contemporary economic decisions and consequences of price hikes, or if the state will need to secure additional sources of funding.