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Social Safety Nets and Subsidy Reform in Egypt: Toward More Effective Policies

Sponsor: Thematic Group on Poverty Impact Analysis, Monitoring and Evaluation
Presenter: John Blomquist (Senior Economist MNSHD)

When: Friday, April 3, 12:30 - 2:00pm

Egypt has embarked on an ambitious program of economic, social and political transformation. The reforms are wide-ranging, extending beyond macroeconomic stability to include measures to reform the financial sector and state-owned enterprises and policies to better allocate public resources. Within this context, the government is beginning to address the role of social policy, particularly in the areas of social safety nets and subsidies.  This is not the first time Egypt has considered reform of subsidies, but the political environment and policy tools may now exist to make reform possible.   This report was prepared to help the government identify and quantify some of the options and tradeoffs faced in reforming subsidies.  It suggests that that the long-run potential payoff from shifting resources out of current subsidies and into a substantially strengthened and expanded assistance program can be significant. In particular, the poor would benefit from a strengthening of the social safety net along the following lines: (i) a significant expansion in the cash-assistance program to raise the benefit levels and expand the coverage; (ii) improving the safety net with better targeting methods like proxy-means testing  and greater use of geographic targeting in order to direct a substantial fraction of public resources to the intended beneficiaries, while minimizing the leakage to the wealthy.  Options for enhancing the safety net include the introduction of a conditional-cash transfer program that helps the poor enhance their human capital, and the introduction of a workfare program at very low wages that provide temporary jobs for the able-bodied poor.

Background Paper

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