CAIRO - Egypt could begin transitioning from subsidising essential commodities to providing direct cash assistance to its poorest citizens as early as the next fiscal year (July to June), Prime Minister Mostafa Madbouly said on Thursday.

Currently, Egypt subsidizes essential commodities for more than half of its population. Over 60 million people have access to discounted prices on staples like pasta, vegetable oil and sugar through state-run outlets, while at least 10 million more benefit from subsidized bread.

“There is widespread consensus that cash subsidies are the way forward,” Madbouly told a press conference, noting that the Ministry of Supply, which oversees Egypt’s subsidy program, is exploring various scenarios for this significant policy shift.

Madbouly expressed optimism that the initial phase of the transition could start in the upcoming fiscal year, provided that consensus was reached on the matter at a year-old national political dialogue that is discussing a variety of reforms.

However, he emphasized that the transition would unfold gradually, in several stages.

The National Dialogue, initiated by President Abdel Fattah al-Sisi in April 2022 amid one of Egypt’s most severe economic crises, aims to generate political, economic, and social reform recommendations for the President's consideration.

The government also subsidises fuel but has outlined plans to reduce these subsidies, aiming to restore fuel prices to their full cost by December 2025.

Despite the double-digit inflation reading, diminishing local currency value, and the growing number of Egyptians living below the national poverty line — now almost one-third of the population — the government has been working to improve the targeting of food subsidies.

According to a recent International Monetary Fund (IMF) report, which followed the disbursement of a new tranche of Egypt's $8 billion loan agreement, this effort includes removing ineligible individuals and maintaining a zero-growth policy in the total number of subsidy beneficiaries.

On Aug. 19, newly appointed Supply Minister Sherif Farouk reiterated that no final decision has been made about the shift from in-kind subsidies to cash assistance. The government, he said, is still awaiting feedback from the National Dialogue.

(Reporting by Mohamed Ezz, Editing by William Maclean)