Poverty Reduction Strategies in Egypt

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Poverty Reduction Strategies in Egypt
2
Poverty Reduction Questions

• Who are the poor, where do they live?
• How have the gains from recent growth affected
  the welfare of the Egyptian people?
• What are the main strategies to reduce poverty?
• Are social safety nets necessary for poverty
  reduction?

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• Poverty Profile in Egypt
• Poverty Measures in 1999/2000
• Overall poverty in Egypt stood at 16.7 ,
  representing 10.7 million individuals.
• Poverty is shallow as poverty gap index was
  2.97, implying an average poverty deficit of the
  poor of L.E. 248.
• Less than one percent of Egyptian spent less
  than 1 a day evaluated at ppp.
• 24.8 percent live on 2 a day
• .

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Regional Poverty Measurements for 1999/2000
Large regional disparities are observed
34.15
16.74
5.06
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• Characteristics of the Poor
• Educational attainment was the factor that most
  affected poverty status the great majority of
  the poor have attained only primary level
  education or with no education.
• Larger families were more likely to be poor than
  smaller ones.
• Poor households had larger dependency ratios
  than the non-poor.
• Female-headed households were vulnerable to
  economic shocks, as their income sources may be
  irregular or insecure.
• Female widows as heads of household, with
  children, were even more likely to be poor.
• The share of working children in households with
  female heads was twice that of male heads in
  urban areas, and 1.3 times in rural areas.

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Poverty Changes Over Time
Poverty Rate
Egypt experienced rapid economic growth in the
late 1990s . Growth averaged over 5 percent per
year between 1996 and 2000, with non-oil GDP
growth reaching a high of 8 percent in 1999.
As a result poverty rate has fallen during the
period 1995/96 and 1999/2000 regardless of the
poverty line chosen..
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Regional Changes in Poverty, 1995-96 to
1999-2000
Poverty trends were not homogeneous. Metropolita
n, lower Egypt regions experiences declines in
poverty rates. Poverty rates in Upper Egypt
increased
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Growth and Distribution Across Regions
Change in poverty could be attributed to changes
in the redistribution of living standards as
distinct from growth in average living standards.

• Only Metropolitan areas showed growth in
  expenditures with increased inequality
• Growth in Lower Egypt was pro-poor, as
  inequality decreased.
• Both low growth and increased inequality
  contributed to poverty growth in Upper Egypt

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• Strategies for poverty reduction
• Several policies have been designed and
  implemented to help low income groups.
• BUT
• Poverty is a highly politically sensitive issue
  in Egypt.
•  There is no government entity responsible for
  planning, monitoring and coordinating the
  different programmes and activities addressing
  the poor,

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Strategies for poverty reduction,cont.
Egypt pursue five main avenues of the poverty
reduction strategy. economic growth for
increasing income and employment of the
Egyptians human development of the poor for
raising their capability through education,
health, nutrition and social interventions
womens advancement and closing of gender gaps
safety net measures for the poor, especially
women, against anticipated and unanticipated
income/consumption shocks through targeted and
other efforts participatory governance for
enhancing voice of the poor .
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Governments Actors    The Ministry of Planning
draw the overall economic and social development
plans for short, medium and long terms.    The
Ministry of Social Affairs (MOSA), provides
several safety net programs    Free education
and literacy programs through the Ministry of
Education,    Free health care through the
local health units and large public hospitals of
the Ministry of Health,    Subsidies for bread.
flour, sugar and oil through Ministry of Trade
and Supply    Rural development projects
through Ministry of Agriculture.
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Selected Economic Policies The Long Term Vision
aims at   Conservation of natural resources and
direction of urban growth towards desert land  
Steady reduction of current population growth
rate    Achievement of high and sustainable
GDP growth    Gradual removal of balance of
payments deficit    Reduce poverty rate to 6
and attenuation of income disparities  
Development of human capital and attainment of
full employment     Improvement of social
services
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Selected Economic Policies Continued
Although the participatory approach has been
adopted in many fields, Government officials
dominate the process of economic growth strategy
and poverty reduction strategy. The poor are
excluded from expressing their realities and
priorities and from participation in the
designing process. .
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Several factors hinder Government efforts in
Participatory Planning
It is true that people are participating in some
governmental and non-governmental initiatives
but they are not in charge. They are not the
designers and owners of the process they are
merely participants. Most people, specially the
poor, are not fully aware of their roles as
citizens. People are still dependent and waiting
for services from government and in particular
the local authorities. Peoples attitudes towards
the government and their own potential to
contribute to development also need to change.
In fact, local authorities bureaucrats work for
the people and not with them. They usually lack
awareness, knowledge and skills to promote
genuine people's participation.
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Social Safety Nets

• Three main social safety net programs
• the consumer food subsidy program,
• the cash transfers from the Ministry of Social
  Affairs,
• the Social Fund for Development (SFD, which
  spent 0.23 percent of GDP)

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1-Food Subsidy Program
The food subsidy program reaches the largest
share of the Egyptian population It is one of
the oldest in terms of continuity of assistance
delivered to the population. It provides all
the population with a subsidy on baladi (or
indigenous) bread, which is provided at about
one-third the cost of production. Subsidies on
sugar and on cooking oil are more restricted, and
are given out through a two-tier system of ration
cards that are based on incomes and need. This
is by far the largest safety net program,
spending 1.5 percent of GDP (or about LE 70 per
capita per year) in 1999.
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Food Subsidy Program,cont.
under coverage and leakage errors
Of commodity subsidies, the subsidy on baladi
bread was the most effective, raising over
730,000 people out of poverty. But it is
inefficient as a poverty reduction instrument, as
it is provided to all Egyptians regardless of
their poverty status. The cooking oil subsidy
was the least effective mechanism, lifting less
than 170,000 people from poverty.
Under coverage is the percentage of poor
population who do not receive subsidy. Leakage is
the percentage of non poor population who receive
subsidy out of total recipients.
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• 2-The Ministry of Social Affairs
• Non contributory Pension Schemes
• The Sadat Pension Scheme introduced in 1980 is
  granted to those reaching the age of 65 and who
  are totally disabled. Another pension scheme
  covers members of the labor force who are not
  covered by pension laws and social security.
• Social Security scheme granted to widows,
  divorced females, orphans, prisoners' families,
  the totally disabled, the elderly, etc..
• The cash transfer programs from the Ministry of
  Social Affairs suffer from low total funding for
  the programs, LE 449 million in 1999/2000 and a
  low per-family transfer amount.
• Total funding was only 0.04 percent of GDP in
  1999, or actual receipts (from the HIECS) were LE
  3.50 per poor person per month.

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Impact of Food Subsidy Programs and Government
Transfers in Reducing Poverty
The subsidy on baladi bread was the most
effective at lifting people out of poverty. While
Cooking oil subsidy was less effective The
resources used for the oil subsidy, would be much
more useful in poverty reduction if diverted to
better targeted programs such as the social
security transfers Although government
transfers were very small in absolute terms
almost 4 percent of the poor came out of poverty
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Alternative targeting Schemes
 
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• 3- The Social Fund for Development     
•   
•    The Egyptian Social Fund for Development (SFD)
  is one of the impressive models in the field of
  SME development.
• SFD is a semi-autonomous governmental agency
  under the direct supervision of the Prime
  Minister.
•   Financed by the Government of Egypt in
  cooperation with the World Bank/IDA, the European
  Union, Arab Funds and other donors.
•  The SFD was created to protect and improve the
  status of the poor and the unemployed, during the
  period of economic transition.

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The Social Fund for Development, cont. The
objectives of the SFD are primarily achieved
through five core programs 1-    The Public Work
program(PWP) 2- the Community Development
Program(CDP) 3- the enterprise development
program (EDP) 4-   the employment and retraining
program (ERP) 5-  the institutional development
program (IDP)
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The Social Fund for Development, cont The SFD
does not implement the contracted projects
directly, but rather through intermediaries or
sponsoring" agencies (469 agencies Credit was
extended to 59,150 entrepreneurs, 26 percent of
whom were female. The entrepreneurs
established about 53,250 small enterprises.
Potable water networks were installed for about
2,770 km's, 1,000 kilometers of rural roads were
constructed unemployed graduates were trained
to meet the demand of the market. Employment
generation is a central purpose of three of the
five core programs of SFD, namely PWP, CDP, EDP.
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• The Social Fund for Development,cont.
• Employment programs have measurable impacts
  benefiting thousands of people estimated at
  360,681 of which 251,065 permanent jobs and
  109,616 temporary jobs.
• EDP program appeared to be cost-effective in
  providing job opportunities and its projects are
  sustainable
• CDP projects are so small that their impact on
  employment outside the family appeared limited.

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• The Social Fund for Development,cont
• BUT
• Reconsideration of channeling EDP credit through
  commercial banks is warranted. Credit officers
  usually lack the developmental sense and are only
  concerned about the current creditworthiness of
  the loanee.
• If commercial banks are to continue sponsoring
  these loans, it has to be through a special
  department which would include trained staff and
  specialized advisors to support the needs of
  small loanees and to deal with small
  developmental loans.
• The project-based approach of SFD to poverty
  alleviation and employment generation excludes by
  necessity those who cannot work and those who are
  too poor to apply for project funding and wait
  for their implementation.

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• Recommendation
• There is a great need for a clear policy
  framework to guide poverty reduction efforts
• A review of national anti poverty plans
  emphasizes the importance of developing a new
  strategy, that focuses on making growth pro-poor,
  targeting equality, empowering the poor and
  generating employment.
• There is a need to establish communication lines
  and networks between targeted poor and vulnerable
  groups and policy and decision makers
• There is a need to establish peoples monitoring
  bodies, involving professional organizations and
  the media (call in radio shows), and setting up
  education programs.
• Introduce Appropriate Curricula at the Primary
  and Secondary Level To make students aware of
  the importance of participation in communitys
  activities
• The administrative structures and procedures need
  reform as there are contradictions in laws,
  regulations and practice, but more importantly
  the hierarchical bureaucratic system needs
  reform.