Egypt plays politics with poverty
President Sisi’s COVID-19 divisive vaccine strategy

As the globe races to inoculate against coronavirus, Egypt President Sisi’s regime plans to profit from the essential shot. Making Egyptians pay for their own vaccines is part of a broader policy that places the burden of the pandemic on the shoulders of the citizenry. By Maged Mandour

President Sisi’s regime has decided to sell the bulk of government procured COVID-19 vaccines, rather than provide them for free. The two-dose Astra Zeneca inoculation will be sold for 100-200 Egyptian pounds (EGP), though the government’s per dose cost is only 47 EGP. Out of a total population of 103 million, the vaccine will be provided for free to medical workers – at least 445,000 doctors – as well as members of the government’s social support programme, "dignity and solidarity", roughly 15 million people at the end of 2020.

Egypt’s current poverty rate stands around 29.7 percent – roughly to 30.5 million people – at least 15 million Egyptians will be unable to afford the luxury of the vaccine. The poverty line is defined as an income of 735 EGP (or less) per month, making the 100 EGP payment an indulgence that most of the Egyptian poor cannot afford. Two vaccine doses would consume between 13 to 27 percent of their monthly income – assuming they live just above the poverty line, an optimistic assumption.

The human cost of COVID-19 has reached a tipping point in Egypt. Unofficial figures estimate Egyptian COVID-19 related deaths between May and July 2020 reached 60,000. This figure was calculated by comparing the mortality rates between 2019 and 2020, for the same three months period.

Vaccine access: class-based apartheid

The vaccine strategy the government plans to implement is bound to create a class-based apartheid in term of vaccine access potentially increasing COVID-19 related deaths among the poor. To date, the popular reaction to the planned sale of the essential vaccine has been muted, except for a lawsuit launched by human rights lawyer Khaled Ali in an attempt to force the government to provide the vaccination for free to all members of the public.

Scene on a street in a poor area of Cairo, Egypt (photo: picture-alliance/blickwinkel/artifant)
The "have nots": Egypt’s current poverty rate stands around 29.7 percent – roughly to 30.5 million people – at least 15 million Egyptians will be unable to afford the luxury of the vaccine. The poverty line is defined as an income of 735 EGP (or less) per month, making the 100 EGP payment an indulgence that most of the Egyptian poor cannot afford. Two vaccine doses would consume between 13 to 27 percent of their monthly income – assuming they live just above the poverty line

The regime’s decision not to offer free vaccines has deep roots in Egypt’s political economy. Namely heavy reliance on debt to finance mega infrastructure projects with dubious economic benefits. Combined with a weak tax base, this dependence places clear restraints on the ability of the state to meet its debt obligation and fund the response to the crisis at the same time.

This debt dependence couples with economic policies dictated by the military and its promotion of a militarised form of state capitalism – weakening the private sector. Hence, the regime’s policy of selling the vaccines is less of an attempt to raise revenues and more of an attempt to reduce expenditures, in the midst of a burgeoning economic crisis.

Egypt’s finances are under huge pressure, which is reducing its ability to soften the impact of the pandemic, and that includes paying for the vaccine. Egyptian structural weaknesses will be exacerbated by anticipated economic downturns from the pandemic. The rate of economic growth is expected to reach 3.5 percent in percent 2020, a decline from 5.6 percent growth in 2019. However, should the pandemic conditions endure, economic growth is forecasted to reach only 2.3 percent in 2021.

This slowdown has placed additional pressure on government finances – leading to an increase in the level of already ballooning debt. Debt is now expected to reach 96 percent of GDP by the end of the fiscal year 2020-2021, up from a projected 90.6 percent in October 2020. This increase places heavy strains on the state budget, with an expected outflow of $20 billion in external debt and interest payments.

Placing this in context, the total expected revenues for the same period amount to 1398 trillion EGP ($89.3 billion), hence 22 percent of government revenues will be used to service external debt. These payments will only address around one third of the total debt and ignore domestic debt, which tops 66.7 percent of GDP as of the first quarter of 2019-2020 fiscal year.

Aggravated by fiscal weakness

The decrease in state finances is further aggravated by the ongoing weakness of the Egyptian tax base, where tax revenues reached 14 percent of the GDP as of September 2020. The government plans to raise this percentage to 16.5 percent over the next five years.

 

In context, the African average is 16.5 percent, with neighbouring countries like Morocco and Tunisia reaching 27.8 percent and 32.1 percent, respectively. The weakness of the tax base means that the state has no alternative but to borrow in order to finance its operations as economic performance weakens due to the pandemic, which in turn only acts to divert funds away from social programmes that can help to alleviate the crisis as a large portion of government revenue is diverted to meet debt and interests obligations.

In essence, creating a self-perpetuating cycle which only acts to aggravate the economic and social crisis. The weakness of the tax revenue can be partly attribute to the plethora of tax exemptions that large corporation, both military and civilians enjoy, which is an integral component of the regime policy of shifting the tax burden to the shoulders of the lower and middle classes.

In the face of entrenched economic woes predating the pandemic, Sisi has long sought to attract international investment to introduce liquidity to the Egyptian economy. In March 2015, Sisi announced that Egypt needed $200 to $300 billion to “develop”. In November 2019 Sisi stated the level of investment had reached $200 billion.

However, the results of this massive investment drive are modest to say the least, with the non-oil private sector showing growth in only five months between July 2016 through June 2019. The bottom line of these massive investments is only increased indebtedness, which hobbles the state and impedes its ability to provide essential health services.

The mega infrastructure projects act as a vehicle for the appropriation of public funds to the benefit of the elites – diverting desperately needed resources from the alleviation of crises. In the midst of a pandemic the regime continues to insist on the continuation of investment in large infrastructure projects, in the time of weakened economic growth, which acts to deepen the crisis.

The latest example of which is the $23 billion high speed electrical rail line connecting the Red Sea and the Mediterranean, to be executed by Siemens, passing through the $58 billion new administrative capital still under construction. The deal was signed in January 2021, in the midst of the ongoing crisis.

 

Shifting the cost of the vaccine to the populace is part of a broader policy that places the burden of the pandemic on the shoulders of the citizenry. For example, one of the main policies for the leverage of necessary funds to combat the crisis has been obtained through the deduction, effective as of July 2020, of 1 percent of state employees’ salaries and 0.5 of related pensions for one year for a government fund to counter the pandemic.

Lack of national lockdown and state support

It is not clear of this measure will be extended. Another indicator is the actual level of spending from the 100 billion EGP fund made available in April 2020, to mitigate the impact of the pandemic, which reached only 48 billion EGP by October 2020 – only 12.5 percent of which was directed to the health sector. The mere 13.7 billion EGP expended by the government on the Egyptian health sector indicates just how far low down the priority ladder the pandemic sits.

The central root of the problem is not just ill-thought-out policies, but also the autocratic nature of the regime. The state is unaccountable to the Egyptian people and able to enact economic policies that further impoverish the general population. In the midst of a pandemic these actions exhibit little concern for the poor. The creation of class-based division for access to the vaccine is bound to increase popular anger among the poor.

Combined with a failing health system, the lack of a national lockdown and state support will continue to drive the human cost of these policies. This trauma will exacerbate the already deepening social crisis engulfing the country – and consequently – the level of accompanying state repression as the regime attempts to consolidate its grip and stifle dissent, increasing the probability of wide scale social unrest and violent protest.

Maged Mandour

© sada | Carnegie Endowment for International Peace 2021

Maged Mandour is a political analyst and writes the “Chronicles of the Arab Revolt” column for Open Democracy.

More on this topic