Egypt announces social aid programme worth $2.5 bln

Cairo (AFP) - Egypt announced Monday a social welfare programme worth $2.5 billion to include increased subsidies and tax exemptions for the country's poorest as inflation reaches record levels.

Prices have soared since the authorities in November floated the exchange rate of the Egyptian pound as part of drastic reforms to obtain a $12-billion International Monetary Fund loan.

The value of the pound has since plummeted, with one dollar -- then worth 8.8 pounds at the official exchange rate -- now worth more than 18 pounds.

In April, core inflation neared 33 percent, and rose above 44 percent for foodstuffs.

A finance ministry statement on Monday said the new programme would include a salary increase for state employees to counter the rise in the cost of living.

It would also provide for a 15-percent increase in pensions to benefit 10 million people, it said.

Subsidies to 1.7 million families among Egypt's poorest are to rise by 30 percent.

And 15 million families are set to benefit from tax exemptions at a cost to state coffers of around $387 million.

Late last year, the government adopted a value added tax and cut fuel subsidies as part of its reforms for the IMF loan.

Monday's announcement comes with the authorities expected to again cut fuel subsidies as part of the reform package, although they have not announced by how much or when this would come into effect.