Social protection policies are designed by the state to protect vulnerable income groups from poverty, health crises, disability, old age, maternity or unemployment. Therefore, a country&rsquo;s social protection system is a cornerstone of the social contract existing between government and citizens, as it aims to mitigate poverty and promote income security.
A large share of Egypt&rsquo;s annual budget is devoted to its social protection system (The World Bank, 2015). This system is centered around different schemes--social insurance, health insurance and social pensions--that provide income security to workers from varying sectors and to those unable to join the formal labor force (Sieverding, 2012).
In order to ensure their effectiveness, the International Labor Organization (ILO) has outlined four guiding criteria to the development of social protection schemes, asserting that they must be: universal, progressive, pluralistic and outcome-focused &nbsp;(ILO, 2009).
In Egypt, however, the promise of universal protection is challenged by financial and regulatory constraints, where pension amounts and &nbsp;coverage do not match the level that promises income security. This commentary outlines the apparent financial limitations of the social pensions scheme in Egypt (a pivotal branch of its social protection system) and possible alternative financing options. &nbsp;
<h3 dir="ltr" style="text-align: justify;">Protecting the unprotected</h3>
In developing countries in particular, where large informal labor markets are pervasive, non-contributory schemes are required to cover workers that are otherwise unprotected (Galiani, Gertler &amp; Bando, 2016). &nbsp;The execution of such schemes however is naturally accompanied by concerns surrounding the fiscal capacity of governments to sustain such schemes. Yet, according to HelpAge International (2011) such pensions can even be administered in countries suffering from weak administrative capacity and underdeveloped financial markets.
In 1980, Egypt adopted a law governing social pensions (Ma&rsquo;ash al daman) to be administered as a state-financed, unconditional, monthly cash transfer offered to those who are unable to participate in the formal labour market; thus, rendering them ineligible for retirement benefits and vulnerable to social risks.
In contrast to social insurance, social pensions are non-contributory, i.e, not financed through wage deductions, but through taxes. The scheme targets households that lack a male income provider and individuals who are not recipients of any other pension type (Sieverding &amp; Selwaness, 2012). The pension&rsquo;s monetary value is determined based on the beneficiary&rsquo;s household size, represented by the number of its members (Sieverding &amp; Selwaness, 2012).
<h3 dir="ltr" style="text-align: justify;">Limitations of the Egyptian social pension scheme</h3>
While governments in many developing countries have recognized the significance of introducing social pensions to mitigate old age and intergenerational poverty, the Egyptian system&rsquo;s success at mitigating poverty and promoting human capital remains limited (The World Bank, 2015). Monthly cash benefits offered by the social solidarity pension are significantly low and have very minimal poverty-reducing effects (Sieverding &amp; Selwaness, 2012).
Moreover, a number of presidential decrees aiming to raise the maximum value of pensions have been arbitrarily issued in a period of less than five years (see Table 1), without significant improvement to the status quo. Nonetheless, increases as such are made on an ad hoc basis, with a reactive rather than preventive approach (Sieverding &amp; Selwaness, 2012).
In a review on social pensions policies, it was underscored how a family consisting of a disabled father with 3 children earned a monthly pension of 70 LE only. This monthly payment represented 15% of the monthly amount required to meet the World Bank&rsquo;s poverty line (457 LE) in 2005. Accordingly, the ideal monthly pension had to be at least 5 times its actual amount for the extremely poor to meet the poverty line (Sabry, 2005).
Pension values witnessed insignificant improvement between 2005 and 2012, when the average social pension received by households rose &nbsp;to only 200 EGP per month (ELMPS, 2012). Nonetheless, notable improvements were not expected to have taken place following 2016, due to increasing inflationary pressures brought about by the pound&rsquo;s depreciation. Through indexing the pension values to the inflation rate, it is estimated that the current maximum pension that has to be offered should be a monthly amount of 1,200 LE at the very minimum instead of 450 EGP.
Table 1:&nbsp;Increases in maximum values of social pensions
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1595436156imageen table 1.png" alt="" width="809" height="225">
Source: Sieverding &amp; Selwaness, 2012; Ido, 2018
In addition to inadequate benefits, the scheme is greatly criticized for its ineffective coverage. World Bank estimates in 2006 indicated that the majority of public social pensions (70%) went to the non-poor whilst the percentage of poor benefiting from these pensions was less than 12% (World Bank, 2007). Reasons for this ineffective coverage include the difficulty of reaching vulnerable income groups and the lengthy procedures and regulations that individuals have to go through to claim their pensions.
It is also apparent that the scheme is not financially sustainable, thereby imposing clear budgetary pressures. In fact, an official statement by the Minister of Social Solidarity asserted that the budget for pension benefits is no longer affordable by the government &nbsp;(Ido, 2018).
Despite the budgetary pressures, spending on social pensions witnessed an observable increase from 2% in the 2011/2012 budget to 11% in the 2017/2018 budget (Ministry of Planning, Monitoring and Administrative Reform, 2018). This was a long-awaited step, seeing that the social pensions budget in previous years was already receiving the lowest share of the government&rsquo;s budget, compared to the other safety net programs (Sieverding &amp; Selwaness, 2012). Along these same lines, it was announced that around half the proceeds from the gradual removal of the energy subsidy (approximately 25 billion LE) will be redirected to finance social protection programs (The World Bank, 2015). Despite the aforementioned increases in targeted social spending, social pension values have not yet been upgraded and are still offered at their low values. It is thus imperative that the social pension scheme in Egypt is in need of financial reform to deliver more adequate benefits.
<h3 dir="ltr" style="text-align: justify;">Financing options in developing countries</h3>
Financing non-contributory social pensions is challenging. However, HelpAge International (2011) provides a comprehensive survey of financing options for social pensions that have been undertaken by governments in low and middle income countries. These are classified into: taxation, overseas development assistance (ODA), debt relief, reallocation of resources and public borrowing.
The ODA approach is a potentially successful option for Egypt, as financial and technical assistance can be sought for a predicted, temporary period, during which national capacity can be developed. Successful cases of such assistance took place in Kenya and Tanzania, where civil society members have been able to hold their governments accountable for their social responsibility.
While there is a multitude of options, each has its own caveats and challenges. For example, in the case of tax-financed spending, it is important to rely on taxes that are broad-based and progressive to avoid overburdening the poor. Another possible option is through a reallocation of government expenditures, where social spending is financed through cuts in inefficient government spending. In Mexico City, social pensions were financed from cuts in senior officials&rsquo; travel expenses and salaries. Similarly, this approach is currently been exercised in Egypt, through the reduction and reallocation of energy subsidies to social protection programs.
<h3 dir="ltr" style="text-align: justify;">So is it only about financial reform?</h3>
Financing considerations are not to be viewed in isolation from political and societal discussions. The inclination towards one method of financing over another must be a product of political and social deliberation and consensus (if possible). Regardless of the method of financing, any social protection reform mandates societal consensus and civil participation on the most appropriate targeting mechanism. This is of utmost significance in order to target the delivery of benefits to the intended beneficiaries.
It is through that consensus that citizens can hold governments accountable for their actions and drive the government&rsquo;s efforts towards more effective solutions. In driving that consensus, the role of civil society and community based organizations must be empowered, as they can serve as effective intermediaries between the beneficiaries and the governing bodies. Most importantly, amidst the anticipated reforms to the pensions system that are currently being discussed in parliament, it is important that social pensions are not compromised.
In addition, the impact of any social pension reform would undoubtedly be highest if accompanied by access to improved healthcare and education services. Additional attempts to address the coverage problem can be via introducing universal schemes such as those provided in South Africa and Ecuador. The applicability of such schemes to the Egyptian context shall be discussed in an upcoming piece.&nbsp;&nbsp;
<hr>
References
<ul dir="ltr">
<li>
Galiani, S., Gertler, P., &amp; Bando, R. (2016). Non-contributory pensions. Labour Economics, 38, 47&ndash;58.<a href="https://doi.org/10.1016/j.labeco.2015.11.003"> https://doi.org/10.1016/j.labeco.2015.11.003</a>
</li>
<li style="font-size: 10pt;">
HelpAge International. (2011). Financing Social Pensions in Low and Middle Income Countries (Briefing No. 4). London: HelpAge International. Retrieved from <a href="https://www.social-protection.org/gimi/gess/RessourceDownload.action?ressource.ressourceId=24123">https://www.social-protection.org/gimi/gess/RessourceDownload.action?ressource...</a>
</li>
<li style="font-size: 10pt;">
Ido, Y. (2018). Social Security Reforms in Egypt 2008-2015: Seeking for Better Coverage, FinanciaSustainability, and &lsquo;Developmental&rsquo; Social Policy (p. 14). Institute of Developing Economies. Retrieved from <a href="https://www.ide.go.jp/library/Japanese/Research/Project/2016/pdf/c13_05.pdf">https://www.ide.go.jp/library/Japanese/Research/Project/2016/pdf/c13_05.pdf</a>
</li>
<li style="font-size: 10pt;">
Ministry of Planning, Monitoring and Administrative Reform. (2018). Egypt&rsquo;s Voluntary National Review 2018. Retrieved from <a href="https://sustainabledevelopment.un.org/content/documents/20269EGY_VNR_2018_final_with_Hyperlink_9720185b45d.pdf">https://sustainabledevelopment.un.org/content/documents/20269EGY_VNR_2018_final_with_Hyperlink_9720185b45d.pdf</a>
</li>
<li style="font-size: 10pt;">
OAMDI, 2016. Labor Market Panel Surveys (LMPS), <a href="http://erf.org.eg/data-portal/">http://erf.org.eg/data-portal/</a>. Version 2.2 of Licensed Data Files; ELMPS 2012. Egypt: Economic Research Forum (ERF). &nbsp;&nbsp;
</li>
<li style="font-size: 10pt;">
Sabry, S. (2005). The Social Aid and Assistance Programme of the Government of Egypt-A Critical Review. Environment &amp; Urbanization, 17(2). Retrieved from<a href="https://journals.sagepub.com/doi/pdf/10.1177/095624780501700203"> https://journals.sagepub.com/doi/pdf/10.1177/095624780501700203</a>
</li>
<li style="font-size: 10pt;">
Sieverding, M. (2012). A Life Course Perspective on Social Protection among the Working Poor in Egypt. Gender and Work in the MENA Region Working Paper Series No. (24), Cairo. Retrieved from <a href="https://paa2012.princeton.edu/papers/122053">https://paa2012.princeton.edu/papers/122053</a>
</li>
<li style="font-size: 10pt;">
Sieverding, M., &amp; Selwaness, I. (2012). Social protection in Egypt: A policy overview (Working Paper No.23). Population Council.<a href="https://doi.org/10.31899/pgy2.1091"> doi:10.31899/pgy2.1091</a>
</li>
<li style="font-size: 10pt;">
The World Bank. (2007). Arab Republic of Egypt. Poverty Assessment Update (No. 39885). World Bank Group. Retrieved from &nbsp;<a href="https://openknowledge.worldbank.org/handle/10986/7640?locale-attribute=es">https://openknowledge.worldbank.org/handle/10986/7640?locale-attribute=es.</a>
</li>
<li style="font-size: 10pt;">
The World Bank. (2015). Building Resilience and Opportunity: Social Protection Reform in Egypt. World Bank Group. Retrieved from<a href="http://www.worldbank.org/en/news/feature/2015/06/09/building-resilience-and-opportunity-social-protection-reform-in-egypt"> http://www.worldbank.org/en/news/feature/2015/06/09/building-resilience-and-opportunity-social-protection-reform-in-egypt.</a>
</li>
</ul>

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