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Egypt Social Progress Indicators Reveal How Austerity Feeds Gross Inequalities

May 28, 2019

IMF-mandated austerity policies in Egypt are amplifying already severe inequalities and undermining the rights to health, education, housing, and decent work for millions of Egyptians. These are the findings of the Egypt Social Progress Indicators (ESPI) project, which after one year of data collection and analysis has published the first independent, systematic review of socioeconomic development in Egypt—the Annual Report for 2018: Measuring Progress Towards Improved Wellbeing in Egypt

The indicators point toward the erosion of the economic and social rights of the majority of Egyptians. They also show that, despite the official narrative of macroeconomic success encouraged by the Egyptian government, the International Monetary Fund (IMF), and other international organizations, Egypt is not on track to achieve equitable and sustainable development by 2030, as it has committed to doing under its Vision 2030 national development agenda.

The in-depth data analysis, developed by CESR, the Egyptian Center for Economic and Social Rights (ECESR), the Egyptian Initiative for Personal Rights (EIPR), the Social Justice Platform, Aspiration Tech and Backspace, and supported by numerous independent researchers and field experts, finds that ordinary people are experiencing significant rights deprivations pertaining to decent work, quality accessible healthcare and education, adequate housing, economic empowerment and secure livelihoods. 

Assessments were made measuring Egypt’s progress on specific indicators for four topics—economic policy; labor; urbanization; and health—and gender analysis was also figured into the selection and scoring of indicators across all topics.
Austerity breeds poverty and social exclusion

ESPI finds that—as a result of IMF-mandated economic reforms—the Egyptian government has enacted regressive tax reforms and budget cuts that impede the systemic changes necessary to eradicate entrenched patterns of poverty, economic inequality and social exclusion. These reforms and cuts affect the generation and allocation of sufficient and equitable funding for public services that are essential for fundamental rights—such as health, education, housing, access to justice, and an adequate standard of living.

For example, due to outsized tax exemptions and incentives, corporate tax in 2015 accounted for only 10% of total tax revenue, while half of overall tax revenues then came from consumer pockets. Despite its constitutional and Vision 2030 commitments to sustainable development through securing citizens’ economic and social rights, Egypt introduced a Value-Added Tax (VAT) that has unfairly impacted the poor and expanded inequality. ESPI’s findings indicate that raising revenue in a more equitable manner could lead to a better distribution of financial burdens on different groups, contributing to improved socioeconomic wellbeing for all. Simultaneously, budget allocations for areas essential to realizing rights, such as education and health, have been decreasing over the last five years. 

These changes are happening in an environment in which the national poverty rate is nearly 28% and growing. Only an estimated 13 million impoverished Egyptians were beneficiaries of social safety net programs in 2015, less than half of the official estimate of impoverished individuals. Moreover, Egypt’s 2017 wealth Gini Coefficient of 91.7% makes it the third most economically unequal country in the world by this measure.  Adding insult to injury, poverty disproportionately impacts women, due to the gendered division of labor and women’s unpaid responsibilities.

Improved living standards require progressive labor policies
The ESPI findings regarding labor conclude that more progressive labor policies and protections would vastly improve the overall socioeconomic wellbeing of Egyptians. Ensuring full and productive employment and decent work, including an adequate minimum wage for all, is key for eliminating poverty, addressing rising economic inequality and achieving sustainable development. 

For example, in 2016 youth unemployment was alarmingly high, with 26.5% of all young people (aged 15 – 29) unemployed. ESPI finds that the government’s economic policies do not adequately regulate the labor market for absorbing young workers (the largest population group in Egypt) and that there is no national strategic plan for private sector job creation. 

Women’s labor force participation rate in 2016 was extremely low, at only 22.9%, and the gender wage gap indicator shows wider disparity than official estimates suggest. Women in the workplace also sorely need more proactive measures against discrimination and structural inequalities, including expanded maternity leave and childcare provisions, particularly in the private sector. 

An artificial housing crisis imperils millions 
The ESPI urbanization indicators show that housing affordability in Egypt is in a major crisis, with inordinate costs barring nearly half of the population from the real estate market and millions of Egyptians being forced to live in informal settlements. IMF-backed austerity policies have caused public investment in the housing sector to drop significantly over the past two decades, while the lack of regulation of the private sector has resulted in high costs for renters. 

Entrenched inequalities threaten health gains 

Although Egypt is performing well on key international outcome indicators—such as child and maternal mortality rates—in comparison to peer countries, outcome gaps reflect entrenched patterns of social and economic inequalities. Declining public spending reveals Egypt’s failure to meet its constitutional healthcare obligations, while the increasing costs of health services impede reaching its Vision 2030 targets. 

Research also shows that almost half of Egyptian families live without any sort of health insurance coverage whatsoever, with extremely low coverage for women and the very poor. World Health Organization data from 2016 determined that out-of-pocket expenditures on health accounted for 62% of total current health expenses in Egypt. 

  The ESPI authors make six major recommendations:

·     Legislative reforms are needed to ensure the full realization of many constitutional human rights obligations, including the protection of the right to work and unemployment benefits, as well as protections against workplace discrimination. 

·     Expanding the breadth of social protection programs like social housing and expanding the coverage rates of social health insurance are necessary. 

·     The government must enhance resource mobilization by improving corporate tax collection efficiency and fighting tax evasion. 

·     Independent mechanisms that monitor and impose penalties on employers who penalize workers for exercising their labor rights are needed, as are government-mandated mechanisms that support community monitoring, participation and accountability

·     A combination of gender-specific policies across multiple areas is needed to ensure that women and girls are not left behind in Egypt’s development plan. 

A Holistic Approach to Rights Measurement
The Egypt Social Progress Indicators are grounded in the belief that a rights-based approach to sustainable development is fundamental for achieving social progress. They seek to understand Egypt’s development in a holistic manner that goes beyond traditional measurements that rely heavily on metrics related to economic growth, such as Gross Domestic Product (GDP). 

Historically, rights fulfillment has been considered difficult to measure, a pretext often used by governments to exclude it from measurement altogether. By using CESR’s OPERA framework, ESPI demonstrates that human rights can provide concrete criteria for evaluating government policies. As indicated above, research for ESPI is grounded in various sources, including the Egyptian Constitution; the targets and indicators in the Sustainable Development Goals (SDGs); and most importantly, Egypt’s national development agenda, Vision 2030. 

Although socioeconomic rights deprivations were major catalysts of the 2011 revolution, the data gathered and analyzed by ESPI make it clear that ill-conceived and harmful austerity policies from the past eight years detract from the fair distribution of public resources and are further undercutting economic and social rights for many. Moreover, Egypt is not on track to achieve its commitments to equitable and sustainable development by 2030.

ESPI seeks to contribute to ongoing efforts by government and civil society actors to achieve sustainable development and realize human rights in Egypt by providing a reliable, comprehensive, and evidence-based analysis of current challenges and how they can be addressed.